Charter Communications (NASDAQ: CHTR) announced a narrowing second-quarter loss on a growing broadband subscriber base and reduced losses among TV video customers.
The Stamford, Conn.-based cable company reported a drop of 29,000 video customers, a marked deceleration from the 55,000 video subs it lost in Q2 2013. Revenue from the company's video services rose 13 percent to $1.11 billion.
The company also added 49,000 Internet customers in the quarter, up from 38,000 in the comparable year-ago time period. The company's broadband services revenue increased 23 percent to $638 million in the second quarter.
Overall, the company missed analysts' Q2 targets, posting a second-quarter loss of $45 million, but that was smaller than the $96 million loss it reported in Q2 2013. The company's revenue rose 15 percent to $2.26 billion, partially due to a boost from its 2013 acquisition of Bresnan Broadband Holdings.
With a fast-growing digital footprint that covered 60 percent of its plant at the close of Q2 and imminent subscriber growth thanks to its pending joint venture with Comcast (NASDAQ: CMCSA), SpinCo, Charter is widely viewed among analysts as having one of the best growth profiles in the cable industry. But especially due to that latter venture, the company has a lot going on. Here are a couple of main points broached during Thursday's earnings call:
The SpinCo Transaction: Charter executives took time to break down its three-pronged involvement with the pending Comcast/Time Warner Cable (NYSE: TWC) merger. Pending regulatory approvals, the complicated transactions will nearly double Charter's video subscriber base to more than 8 million, with the company swapping out many of its legacy systems for those already digitally upgraded, while shifting subscribers into regions in the Midwest and Southwest where it can market to them more efficiently.
Another possible benefit: The incoming video subscriptions feature program licensing deals carved out under the superior scale and leverage of Comcast and TWC. When asked during Thursday's Q&A, Charter executives refused to discuss this matter.
Spectrum Guide: Charter executives attributed the company's slowing video subscriber losses to competitive service improvements, notably the offering of its Spectrum service which features 60 Mbps broadband speeds and over 200 HD channels. The company is particularly bullish about its "Spectrum Guide" interface, which it's currently testing in Fort Worth, Texas. The system is designed to compete with Comcast's X1 platform for customers seeking a state-of-the-art pay-TV user experience. But since it's cloud-based, Spectrum Guide doesn't even require customers to have a DOCSIS-capable modem and can run on all of Charter's currently deployed set-tops. Charter expects to soon have Spectrum Guide deployed across its entire footprint.
"We think it's going to be commercially launched everywhere we operate in 2015, and unless we find something in our testing that throws us off that track, that's our intention," said Tom Rutledge, president and CEO of Charter. "We think we'll be able to launch that same user interface across all of the asset's we're acquiring and servicing as part of this transaction, so it has a dramatic possibility in terms of completely changing the look and feel and upgrading the state-of-the-art user interface functionality across not only 'old' Charter but ''new' Charter, as well."
- see this release (PDF)
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