Rutledge Sees Potential In Charter Footprint

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Charter Communications' new CEO Tom Rutledge offered a glimpse into his strategy for the mid-market MSO Monday and it centers around converting the nearly 8 million homes in its footprint that don't currently buy services from the cable company into customers.
Rutledge officially became Charter's CEO on Feb. 13, after a nearly 10-year tenure as chief operating officer at Cablevision Systems. While he admittedly has been on the job for just two weeks - he claimed he was still learning how the elevator works at company headquarters - Rutledge believes that Charter's main potential lies in the 12 million homes it passes. And he said that the company can gain additional scale by addressing the needs of that footprint rather than having to go on an acquisition binge.
With about 4.1 million basic customers, Charter has the lowest video penetration among the publicly traded MSOs at 35%.
"Charter can be a very successful company at its current size," Rutledge said. "The thing that is great about Charter is that it has 12 million passings. It's got a huge runway in terms of opportunity and it can be a much larger company without any kind of change in potential marketplace."
Rutledge praised Charter's high-speed data service - he said it was best-in-class inside its service area - and said the company can build on that product superiority to grow its other segments.
Under its previous CEO Mike Lovett - who notified the company last year that he intended to step down - Charter has been beefing up customer service and has experimented with several different pricing packages and product offerings. Rutledge praised those moves - Charter said it has reduced services and truck calls by about 7% in the fourth quarter - and vowed to build on that momentum. But he added that early efforts will likely focus on growing the video product.
"At a fundamental level I think our video product in some households isn't as competitive as it ought to be," Rutledge said. "Our job is to make it more competitive and superior to our competitors as quickly as possible."
But the former Cablevision executive stressed that Charter is different from his old employer.
"Charter is not Cablevision and it's a different time and place for me with the issues in front of Charter," Rutledge said on the call. "But inherently, the physical asset, the cable system that passes 12 million homes at Charter, is a highly capable network and we can design products on that network that are superior to our competitors. It is true that it is less clustered, which requires different kinds of marketing strategies and tactics but those tactics are available to us. At some level the cable systems are similar.
"Obviously Charter went through some unique circumstances that gave it a marketplace disadvantage," Rutledge continued. "But those issues are behind us. Now we have a green field marketplace opportunity. And when you think about how many unsold passing we have, there is a big opportunity."
Charter has been one of the pioneers in selling high-speed Internet and phone service to satellite video customers in its footprint - at the end of the year, it had about 785,000 non-video subscribers. Those efforts will continue, with a goal of making those homes video customers as well in the future.
Charter seems to be making headway. In the fourth quarter, it reduced its basic video losses by about 25% compared to the prior year, shedding about 45,000 video customers. High-speed data additions of 67,700 were more than double the prior year and phone customers grew by 27,000. For the period, revenue rose 2.6% to $1.8 billion and cash flow was flat at $686 million.

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