Charter Communications on Tuesday reported solid second-quarter earnings, beating most analysts’ expectations for subscriber and financial metrics.
Charter shed 73,000 residential video customers in Q2 2018, which beat Street forecasts of 108,000 and was better than the 91,000 loss in the second quarter of 2017. The cable operator also noted that limited basic video subscriptions represented all of Charter’s video customer losses for the year ended June 30, 2018.
MoffettNathanson analyst Craig Moffett said in a Tuesday research note that limited basic tier losses might not have a big impact in economic terms.
“Coupled with the unwinding of bundled discounts when subscribers cut the video cord (that is, the step-up in broadband price paid), and the reduction in non-programming cost to serve, it is almost certainly the case that the economic impact of losing these subscribers is negligible…or even positive,” Moffett wrote.
Charter indicated that by the end of the quarter 91 percent of its footprint was all-digital, with about 6 percent of Legacy Time Warner Cable footprint and 50 percent of Legacy Bright House’s footprint not yet converted to all-digital.
Video revenues hit $4.4 billion in the second quarter, up 5.9 percent year over year, which Charter attributed to annual rate adjustments, promotional roll off and higher number of expanded basic video customers. The bump was also driven by higher bundled revenue allocation related to the launch of its Spectrum pricing and backing in Legacy TWC and Legacy Bright House footprints, according to Charter.
On the broadband side, Charter added 218,000 residential internet subscribers, which solidly beat estimated gains of 185,000, and was slightly below last year’s addition of 230,000 subs. Charter reported voice losses of 45,000.
Charter ended the quarter with 23.1 million residential broadband customers, with more than 60 percent of those subscribing to speed tiers of 100 Mbps or above.
Internet revenues grew 7.3 percent to $3.8 billion, due to the addition of more subscribers and promotional roll off, along with bundled revenue allocation due to the launch of Spectrum pricing and packing in legacy footprints.
Total customer relationships were up 3.3 percent to 27.62 million.
Overall, second quarter revenues grew 4.8 percent to $10.9 billion year over year, attributed to rises in video, broadband, commercial and advertising revenues.
Charter reported Q2 earnings of $273 million, or $1.15 a share, up from the year ago period of $139 million or 52 cents a share.
Second quarter adjusted EBITDA rose 5.3 percent from the year ago period to $4.1 billion, and Charter said adjusted EBITDA grew 6.2 percent when excluding $33 million in Q2 mobile costs.
“Over the last two years, we have invested significantly to quickly integrate and unify the operating strategies of three large cable operators. While that process is disruptive, it has allowed us to position our residential and commercial businesses for long term growth and success, which is beginning to show in our operating results,” said Tom Rutledge, Chairman and CEO of Charter Communications, in a statement. “By the end of this year our integration will be nearly complete, and we will be operating as one company, with a unified product, marketing, and service infrastructure, which will allow us to accelerate growth and innovate faster.”
