Charter Losing Subs, Gaining Cash Flow

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Charter Communications Inc. reported operating-cash-flow growth of 14.3
percent on revenue growth of 13.8 percent in the second quarter, but it said its
decline in basic subscribers is likely to continue.

For the second quarter, Charter reported revenue of $1.16 billion and
operating cash flow of $501 million.

But basic subscribers dropped by 42,500 in the period, some of which can be
attributed to seasonal disconnects involving students leaving school for the
summer or residents leaving their homes for summer residences.

'We're not satisfied with the loss,' chief operating officer Dave Barford
said during a conference call with analysts. 'It will be difficult to get them
all back.'

Barford explained that Charter could spend marketing dollars to bring those
customers back into the fold, but it is instead focusing its attentions on
retaining and attracting higher-paying customers.

That seems to be paying off. Charter added 156,000 high-speed-data customers
in the second quarter, its highest quarterly growth yet.

The MSO added 172,000 digital-cable customers to end the period with 2.4
million. Charter's digital penetration, at 35 percent, is the highest in the
industry.

Barford also addressed published reports last week that Charter was counting
cable-modem-only subscribers as video subscribers.

Although he said the MSO does count about 40,000 modem-only customers as
basic subscribers, it makes nonvideo customers pay an additional $10 per month
for broadcast-basic video service.

CEO Carl Vogel said the company has hired an adviser regarding the possible
sale of cable systems in nonstrategic areas. Although he wouldn't provide
details, published reports have said the MSO hired Daniels & Associates to
broker the sale of systems in Utah, Arizona, Colorado, Kansas, Nebraska, New
Mexico, Oklahoma, Texas and Nevada with about 600,000 subscribers.

Vogel added that Charter would want at least $3,000 per subscriber for the
systems, or it would pull them off the block. He said that in any transaction,
Charter would seek to retain a minority interest and management control of the
assets.

Charter stock rose 33 cents in trading
Tuesday, closing at $2.97 apiece, up 12.5 percent.

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