Charter Sees Sub Losses in 3rd

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The bad news continued to flow from Charter Communications Inc. last week, after the fourth-biggest U.S. cable company said it would lose basic subscribers for the third consecutive quarter.

The operator said in a securities filing it would lose 55,000 to 60,000 basic subscribers in the three months ended Sept. 30.

Revenue is expected to rise about 7.5% in the period, but cash-flow growth will be flat compared with the same period a year ago.

For all of 2004, Charter said, revenue is expected to exceed the 6% growth in the 2003 third quarter, but cash-flow growth will likely fall short of the 7% increase of the 2003 period.

DIGITAL SLOWS

Digital-subscriber growth also is expected to slow. Charter said quarterly net gains will be between 35,000 and 40,000 digital subscribers, versus a gain of 58,500 in the 2003 period.

High-speed Internet additions will also be down — to an increase of between 105,000 and 110,000 in the third quarter, after a gain of 137,400 in the 2003 period.

This would be the third consecutive three-month period of basic subscriber losses for Charter. It gained 11,000 customers in the third quarter in 2003, but has lost a total of 105,800 basic customers in the nine months since then.

Charter is expected to release full third-quarter results on Nov. 4.

At an industry conference last Thursday, Charter CEO Carl Vogel tried to downplay the losses — he said one-third of them were basic-only customers — and said the company would continue to focus on driving new services growth and paying down debt.

Charter has been successful in selling off non-strategic systems to pare leverage, and Vogel and co-chief financial officer Derek Chang said that strategy would continue. Chang even said Charter would consider selling off its larger systems — including ones in the coveted Los Angeles market.

Los Angeles is Charter’s second-largest individual market, with about 500,000 subscribers (St. Louis is No. 1). Comcast Corp., Time Warner Cable, Cox Communications Inc. and Adelphia Communications Corp. all have a presence.

THEY LIKE L.A.

Asked by an attendee at the Deutsche Bank 2004 Global High Yield Conference in Scottsdale, Ariz., if Charter would consider selling L.A., Chang replied: “Absolutely. At this point the company has to consider what options are in front of it to help improve its position. If there is a transaction, either through a sale or a joint venture or anything like that that potentially helps put us in a better position, I think we have to evaluate it pretty seriously.”

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