Charter Communications increased its focus on non-video customers in the second quarter, including partnering with satellite giant Dish Network to sell voice and data service to select customers, while video subscriber losses rose slightly in the seasonally weak period.
Charter has been a pioneer in focusing on satellite and telco video customers in its markets, offering aggressive broadband and phone packages in the hopes of later adding video service to the mix. Charter closed out the second quarter with 673,500 non-video subscribers, an increase of about 40,000 customers sequentially and a 26% increase over the same period last year. Non-video subscribers represented about 13.9% of Charter's total residential subscriber base in the period, up from 10.8% in the prior year.
On a conference call with analysts to discuss quarterly results, Charter CEO Mike Lovett said that the MSO has concentrated on adding non-video customers for years. Earlier this year, he said, the MSO partnered with Dish to offer its high-speed data and voice products to satellite TV customers in select markets. Essentially Charter is including its voice and data marketing materials inside some Dish customer bills.
Lovett did not reveal any further details, but said both parties are pleased with the pilot program and are expanding the relationship. Charter also is exploring other non-traditional sales channels.
"The response rate is extremely favorable relative to a Charter direct mail piece," Lovett said.
Charter also is increasing its efforts to target higher-credit risk customers, launching Charter Starter in several markets this year. While Lovett was light on the details, he said that Charter has suppressed its marketing to that particular segment for the past three quarters. And though the MSO has found in the past that about 70% of high-credit risk customers churn within the first nine months of getting service - mostly due to an inability to pay - Charter believes the new package will be easier for cost-conscious customers to manage.
Lovett did not want to give too many details of the package for competitive reasons, but said that Charter Starter limits a customer's access to higher cost elements. After a certain number of months of on-time payment, those elements - including digital tiers, faster data speeds and enhanced features - are made available.
The new offers come on the heels of a targeted rate increase that is still rolling out across Charters footprint, including a doubling of its sports tier pricing from $5 per month to $10 per month, increasing its modem rental pricing from $5 per month to $7 per month for customers not under a price guarantee or not taking home networking and moving monthly charges for analog video closer to pricing for digital packages.
Charter chief financial officer Christopher Winfrey said that it is too early to tell what impact the increases will have.
"All of those price increases roll out sequentially through the quarter and Q3, so you certainly won't see the full impact of either the revenue increase or the churn related to that until the end of Q3 on a run rate basis," Winfrey said.
For the second quarter, total residential video customers declined by 79,900 in the period to 4.17 million, while digital cable customers rose by 4,900, high-speed Internet subscribers increased by 18,500 and telephone customers rose by 6,600 in the period. Charter said the decline in video customers - up slightly from the same period last year when the MSO lost 71,700 basic video subscribers - was a combination of normal seasonality as customers moved to summer residences and disconnections by video-only subscribers.
Revenue during the period was up 2.2% to $1.8 billion and cash flow increased 4.8% to $673 million