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New video products pump up Charter's Q2

Thu, 07/31/2014 - 1:59pm
Brian Santo

Charter Communications lost almost half as many video subscribers in its second quarter of 2014 as it did in its second quarter in 2013, which the company attributed its introduction of more attractive video products than it offered a year ago. Total customer relationships were up, however, thanks to broadband.

The combination helped lead to increased revenue, and a halving of Charter’s overall quarterly loss. The net loss figure in the second quarter just ended was $45 million, compared to a loss of $96 million in Q2 2013.

Residential video customers decreased by 29,000 in the second quarter of 2014, versus a loss of 55,000 in the year-ago period.

The MSO added 49,000 residential Internet customers in the second quarter of 2014, compared to 38,000 a year ago. Charter also added 35,000 residential voice customers.

Commercial customer relationships grew by 6,000 in the second quarter of 2014, compared to a gain of 7,000 customers in the prior-year period.

Earlier this year, Charter began introducing additional features with its triple play services, branded as Charter Spectrum. During the second quarter, Charter continued the rollout of Spectrum in other markets it recently converted to all-digital, including St. Louis, Madison, Reno, portions of its Michigan, North Carolina and Alabama footprints, and other areas.

The company reported that it has about 60 percent of its footprint converted to all-digital (covering 80 percent of its subscribers, not including the former Bresnan systems), and is on track to complete the company-wide transition by the end of the year.

Spectrum includes an expanded lineup of HD channels (now more than 200), more video on demand selections, and a minimum of 60 Mbps internet connection.

During the company’s call with analysts this morning, CEO Tom Rutledge also spoke about the new Spectrum guide, delivered to all connected devices through ActiveVideo’s cloud-based platform, which Rutledge and his team of former Cablevision colleagues first tried out at Cablevision.

“Earlier this month we launched our new cloud-based guide, called ‘Spectrum Guide,’ to a subset of our Fort Worth, Texas customer base,” Rutledge said.

“The attractiveness of the UI,” he continued, “is that it’s a state-of-the-art user interface, cloud-based, and it works both on new boxes and legacy boxes, and it works on whether or not the box has a DOCSIS modem in it or whether its pre-modem generation CPE.  And 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, and we think we’ll be able to launch that same user interface across all of the assets 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.”

The “assets” Rutledge referred to include the former Bresnan Communications operations. The company completed the purchase of those operations from Cablevision last year.

Charter reported that its capital expenditures were $570 million in the second quarter of 2014, compared to $422 million during the second quarter of 2013.

The MSO said it expects 2014 capital expenditures to be approximately $2.2 billion, driven by all-digital transition, including the deployment of additional set-top boxes in new and existing customer homes, growth in its commercial business, “and further spend related to efforts to insourceservice operations as well as product development.”

In response to an analyst’s question about spending, both in general and specifically on set-top boxes, Rutledge said, “I don’t think the trial of the user interface is directly related to our box strategy.  What I mean is, by the end of this year, historic Charter, we will be all digital and we’ll be buying a relatively small number of boxes without this transaction.  So as we go into ‘15, we would want to put the user interface out in historic Charter on all boxes that we’ve already bought and it would have no impact on future pricing or future box prices. 

“In the acquired systems,” Rutledge continued, “how soon we can get going with an all-digital strategy in 2015 after a transition services agreement is put in place, how that would roll out in ’15, I don’t really know, but it wouldn’t happen the day that you close that you would move to a much faster capital spend. You’d have to do some planning, packaging and pricing, and branding and prepare the system operationally for a new set of hardware, which takes time.”

 

Map of systems involved in Comcast / Time Warner Cable / Charter Communications / Spinco deal

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