Charter Communications CEO Mike Lovett, in his first quarterly earnings conference call since announcing he will step down in April, added his voice to the growing throng of cable CEOs anointing broadband as their core business, telling analysts Tuesday morning that the St. Louis-based MSO sees itself more as an Internet service provider.
Charter has been one of the pioneers of selling voice and data-only service to households. And in the third quarter, that leadership was even more prominent, with non-video subscribers rising by 54,900 while basic video customers fell by 65,000.
In a research note, ISI Group media analyst Vijay Jayant wrote the rise in non-video customers shows that the MSO is "taking a pragmatic approach to the continued headwinds it's seeing in selling video products."
That approach appears to be continuing with Charter's announcement Tuesday that it will launch a product later this month that will allow customers to search for content on Netflix, Amazon and Hulu as well as video available directly from the cable operator.
Lovett added that a test in the second quarter with Dish Network to sell voice and data service to Dish satellite TV customers in certain markets has been successful and Charter began marketing the Dish partnership across its entire footprint at the end of the third quarter.
"The video business has its challenges," Lovett said on the call. "It's still a significant part of our business, so we're not abandoning it by any means. We do see ourselves, and the mantra inside the company is to think of ourselves, as an ISP. I think that not only drives the strength of our superior broadband product but also supports the video business and other services over time, particularly as the infrastructure evolves to all IP."
Lovett isn't exactly alone. Video subscribers have been declining across the cable industry since 2002. At the same time broadband customers have been rising at a rapid pace.
Last May, Time Warner Cable chairman and CEO Glenn Britt declared broadband its core product.
In the third quarter, video revenue accounted for about half of overall revenue, according to chief financial officer Christopher Winfrey. Most analysts suspect that video will fall below 50% of total revenue for Charter by 2013.
On the financial front, Charter had a solid quarter. Revenue of $1.81 billion slightly beat consensus estimates of $1.8 billion and cash flow of $653 million was in-line with expectations.
The St. Louis MSO soundly beat consensus estimates for high-speed Internet growth, adding 53,000 in the period versus expectations of 45,000 additions. Phone additions of 10,900 were below expectations, but in line with the performance of its peers.
Investors seemed to be encouraged by the results, especially in the wake of disappointing third quarter performance from Time Warner Cable and Cablevision last week, driving Charter shares up 2.4% ($1.08) to $47.02 in afternoon trading.