Charter Communications reports it lost 90,000 video subscribers in the second quarter, though the drop off was an improvement over last and not as bad as analysts’ expectations.
However, earnings per share of 53 cents fell far short of estimates predicting 79 cents per share. Net income declined to $139 million from $248 million on a pro forma basis year over year. Charter says the decline was driven by a “pension curtailment gain” connected to Charter’s decision to freeze TWC’s legacy defined benefit plans in the second quarter of 2016, along with higher depreciation and amortization in the most recent quarter.
Revenue rose 3.9 percent, hitting $10.36 billion for the quarter, compared with $9.97 billion on a pro forma basis in the same quarter last year. This was just a bit behind the 4.2 percent growth forecast by Wall Street analysts.
Charter’s loss of 90,000 net residential pay TV subscribers is a slight improvement from losses of 152,000 the year prior and 140,000 in the first quarter. The number was also much better than Jeffries estimates of 158,000 net losses.
Video revenues totaled $4.1 billion in the second quarter, with almost no change compared to last year on a pro forma basis.
Internet net additions of 231,000 helped save overall net add figures, allowing Charter to post total residential net additions of 155,000. The company closed the period with 22 million total residential broadband customers.
Internet revenue rose by 12.1 percent year-over-year, to $3.5 billion, spurred by an increase in internet customers over the last year and revenues related to the launch of Spectrum pricing and packaging in the legacy TWC and Bright House areas, Charter reports.
The company says minimum internet speeds of at least 100 Mbps are now available to over 50 percent of its total footprint, with nearly all of its remaining footprint offering minimum speeds of 60 Mbps.
One area where Charter exceeded expectations was in cost reductions, MoffettNathanson analysts note.
The cable operator reduced its quarterly cost to service customers by $77 million, or 3.9 percent year over year. Charter also cut quarterly marketing expenses by $15 million or 2.4 percent, and other expenses by $44 million, or 5.2 percent.
Spectrum rollout
In June, Charter completed the rollout of its Spectrum brand, introducing new pricing and packaging in the legacy TWC and Bright House footprints. It also completed the Spectrum launch for small and medium business in those markets in July.
“We are now offering a simple high value product across our 50 million passings under one brand, Spectrum,” Charter Chairman and CEO Tom Rutledge comments. “That product is working in the marketplace, and we continue to see higher year-over-year customer connect volumes across our new footprint.”
“As we move forward with our integration, more of our customers are getting better products at better prices, which will drive higher customer satisfaction, lower churn, and greater value into our business,” he adds.
Wireless progress
Rutledge also mentioned the company’s wireless product developments continue to move forward and Charter plans to launch a wireless service as an MVNO on Verizon’s network in 2018 alongside Comcast.
“We’re also testing the capabilities of our network with 5G–like services,” Rutledge says. Charter has already received permission from the FCC to test in a number of areas and began field trials just last week, he notes.
“We intend to use our trials to provide us with better insight into the capabilities of our robust broadband network architecture,” Rutledge adds.
