Cable Operators

Charter Loses 59,000 Basic Subs

8/09/2004 3:30 PM Eastern

A rate increase in the second quarter and normal seasonality contributed to a loss of about 59,000 basic customers for Charter Communications Inc.

The St. Louis-based MSO ended the second quarter with about 6.133 million basic customers, down from 6.192 million in the in March.
The basic subscriber loss also helped to drive down cash flow growth in the period at about 1.5%, in line with analysts’ estimates. Revenue growth in the period was 6% to $1.239 billion.
Charter CEO Carl Vogel said, on a call with analysts, that about 30% to 40% of the basic subscriber losses were due to seasonal changes, such as college students and snowbirds returning to summer residences.
He blamed a 4% to 5% rate increase for the rest.
Vogel said second-half rate increases should be in the 3% to 5% range.
Charter also lost about 7,200 digital customers and gained 58,400 residential high-speed data subscribers in the quarter.
Charter also said it has successfully migrated high-speed data customers to a new pricing scheme, which offers 3 speeds of Megabits per second for $39.99 per month and a low-end package at 384 Kilobits per second for $29.99 per month.
But Vogel said on the call that a higher percentage of customers than expected chose the lower-priced service. About 60% of high-speed data customers opt for the 3 Mbps package.
Vogel said Charter will continue to focus on higher-end advanced services customers. Charter had about 51,000 HDTV customers in the quarter and the service is available to 2 million customers in its footprint.
Digital video recorder penetration has tripled since January and Charter will accelerate its DVR rollout plan to 15 to 20 additional markets by the end of the year.
Capital expenditures increased 25% to 200 million in the second quarter, mainly due to purchases of customer-premises equipment for advanced services. As a result, unlevered free cash flow (operating income before depreciation and amortization and after capital expenses) was down 11% in the period.

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