Cable Operators

Bickham Blasts TWC

Charter Operations Chief Says MSO Has Failed Strategy 1/14/2014 7:07 PM Eastern

Charter Communications chief operating officer John Bickham blasted Time Warner Cable in a conference call with analysts Tuesday, claiming the cable giant’s strategy is “failed.”

“Time Warner Cable has a failed operational strategy,” said Bickham, who served 18 years in various top operations roles at TWC before joining Charter CEO Tom Rutledge at Cablevision Systems in 2004. Rutledge left Cablevision in 2011 for Charter “They are losing video customers at an accelerating rate, they lost residential Internet subs over the last quarter, they lost phone customers over the last year, and amazingly they have lost residential customer relationships over the last 18 months. This negative momentum isn’t simply the result of their operating plan over the last year; it is a failed plan over the past half-decade.”

Charter made an unsolicited $132.50 per share offer for Time Warner Cable Monday, which was quickly rejected as “grossly inadequate” by TWC chairman and CEO Rob Marcus. However, Marcus has said that while the company is not for sale, it would accept an offer for $160 per share. 

The Charter offer represented a thin 10-cent per share premium to TWC’s $132.40 per share closing price on Jan. 13. But since then the stock has soared – it closed at $136 per share on Jan. 14, up $3.60 each or 2.7% -- indicating that shareholders are expecting Charter to increase its bid.

Bickham’s and Charter’s plan to right the ship in a nutshell involves converting TWC’s plant to all-digital – he said it has up to 50 analog channels in some systems, which limits HD offerings and data speeds – and by providing a more solid management structure.

By failing to invest in DOCSIS 3.0 technology to provide higher-quality service, TWC was forced to “nickel and dime” its customers with additional fees and charges for modem rentals and pass-through fees for its telephone service.

“[They] wound up looking much like their telco competitors,” Bickham said.

Later, he added that after losing more than 800,000 video customers in 2013, “I don’t really see how anyone could expect an actual acceleration of residential revenue, without some type of transformational event”.

In response, Time Warner Cable said in a statement that Charter’s comments are masking the real problem with its unsolicited bid – it grossly undervalues the company.

"There was nothing in Charter’s presentation and call today that changes the fact that its proposal is grossly inadequate,” TWC said in a statement. “We have engaged with Charter, but Charter is not prepared to pay for a one-of-a-kind asset that Tom Rutledge referred to today as the biggest and best M&A option available. We are confident in our standalone plan and we are not going to let Charter steal the company.”

Asked if Charter would take any steps to get a deal done, especialy if TWC sticks to its $160 per share take-out price, Rutledge said,  “We have that option, but at the moment this is our plan.”

And for the time being, that is to encourage TWC shareholders to pressure the company to the negotiating table, adding that the company could just as easily step aside.

“Before we take the process to the next step or walk away and focus on the core business and other M&A opportunities, both of which are real options,  we thought it made sense to let both sets of shareholders know where things stand and let Time Warner Cable shareholders decide the future of their company,” Rutledge said.

 

March