Charter Keeps Cable Momentum Going

The last of the major cable operators reported first-quarter earnings last week, and Charter Communications kept the operational good news rolling, beating most analysts' estimates.

Charter reported a sixth consecutive quarter of double-digit revenue and cash-flow growth, powered by gains in its telephony product.

The Paul Allen-controlled cable firm reported earnings after Time Warner, Comcast, Cablevision Systems and Mediacom Communications, and maintained its momentum of strong revenue and cash-flow growth and (in some cases) basic-subscriber improvements.

Citigroup media analyst Jason Bazinet said in a research note while there were still some questions at Charter — the analyst said it will take time for the company to grow into its capital structure and did not see positive free-cash-flow generation at the company until at least 2012 — he was pleased by the continued progress.

“For our part, we believe we're acutely aware of the risks of owning Charter, but we continue to like the story,” Bazinet wrote. “As we come to the tail end of Q1 '08 earnings, every cable company reported results that met or exceeded Street consensus, including Charter. That suggests we could be poised for a period of multiple expansion across the sector.”

First-quarter revenue at Charter was up 10.55% to $1.6 billion and cash flow increased 10% to $545 million. Charter added 302,000 revenue-generating units in the period (its best RGU quarter since 2003), led by 125,700 additional telephony customers.

Charter also added 85,700 high-speed Internet customers, 102,800 digital video customers and lost 11,900 basic video subscribers.

The basic losses were below most analysts' estimates and Charter said the bulk of the decline was from its lowest tier of video service.

CEO Neil Smit said the company will begin rolling out its new 16 Megabit-per-second high-speed data service in all of its key markets this year.

He also said Charter is evaluating all of its wireless options and working “in some different partnership relationships,” without elaborating.

Charter is also looking into the recently announced joint venture between Sprint Nextel, Clearwire, Comcast, Time Warner Cable, Bright House Networks, Intel and Google, but so far has “not been approached” by the partners to join, Smit said.

Charter stock was down 2 cents each to $1.17 per share last Monday.

Charter separately said it regained compliance with NASDAQ Global Select Stock Market minimum pricing standards May 12, the tenth consecutive business day the stock closed at or above $1 per share.