Charter loses more video subs, widens loss in Q2
Charter Communications' second quarter saw an increase in non-video subscribers but a sharp decrease in video customers, as well as a widening net loss with slight growth in revenues.
Second-quarter revenues totaled $1.79 billion, up 1.1 percent compared with the year-ago quarter. The net loss was $107 million, compared with $81 million a year ago.
During the second quarter, Charter continued to invest in bandwidth efficiency and capacity initiatives, including DOCSIS 3.0 and SDV upgrades. As of June 30, the company had SDV available in 68 percent of its footprint and DOCSIS 3.0 in front of 85 percent of its footprint.
Charter said that both D3 and SDV "are expected to be essentially complete by the end of 2011."
And on the company's earnings call, Mike Lovett, president and CEO of Charter, discussed the introduction of "a number of new products and packages to help maximize the value of our services and bundles for both the higher-end users, as well as high credit risk households, such as 'Charter Starter.'"
Chris Winfrey, the op's CFO, referred to Charter Starter as "a light version of our triple-play offering."
"We believe a more suitable product can better service this segment without relinquishing the discipline that benefits our bottom line today," Winfrey added.
Residential primary service units (PSUs) decreased by 54,800 in the second quarter, as increases in Internet and phone PSUs were more than offset by a decline in video PSUs. Non-video PSUs grew by 40,800, nearly double the growth during last year's second quarter. Bundling over time to maximize retention and customer profitability remains a key strategy, Charter said, with 61.6 percent of residential customers in a bundle, compared with 59.2 percent a year ago.
Video revenues were $903 million, a decrease of 3.1 percent compared with the second quarter of 2010, as a result of a decline in basic video customers. Residential video customers decreased by 79,900 in the quarter, while digital video customers decreased by 4,900. At the end of June, 55.7 percent of Charter's digital customers used HD and/or DVR services. As a result, video ARPU was $71.40 for the second quarter of 2011, up 3.4 percent year-over-year.
Internet revenues were $419 million, up 4.2 percent year-over-year. Charter added 18,500 residential Internet customers. Nearly 95 percent of the operator's customers have a broadband plan of 12 Mbps or higher.
Telephone revenues for Q2 totaled $213 million, up 3.4 percent over second-quarter 2010 as growth in the triple-play bundle continued. And second-quarter net gains of phone customers were 6,600, with phone penetration at 16.3 percent as of June 30.
The company ended its second quarter with 13.1 million revenue-generating units (RGUs).
Commercial revenues rose to $141 million, a 16.5 percent year-over-year increase, primarily reflecting higher sales to small- and medium-size businesses and carrier customers. Commercial PSUs increased by 6,600 in the second quarter to 457,100, and were up 8.3 percent over the second quarter of 2010. Commercial Internet and phone PSUs increased year-over-year by more than 20 percent. In addition, revenues from carrier customers, which aren't reflected in PSUs, nearly doubled.
Total ARPU for Q2 was $133.84, an increase of 7.4 percent compared with Q2 2010, primarily as a result of increased bundle and advanced services penetration, along with growth in commercial business. For the first half of 2011, Charter lost 12,100 total customer relationships, as compared with 45,900 in 2010, reflecting the early benefits of strategic investments partially offset by customer acquisition.
Advertising sales revenues were $76 million, a 5.6 percent year-over-year increase.
"We delivered another solid quarter of adjusted EBITDA growth and substantial free cash flow," Lovett said. "For the remainder of 2011, we will continue to focus on our key strategies of enhancing our customers' experience, leveraging our Internet advantage while we develop next-generation video services and aggressively pursuing growth in our commercial business."