Smit: Charter Showing ‘Consistency’

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Charter Communications Inc. reported its first-quarter results Tuesday, with basic subscribers up by about 12,000 (not including 17,500 acquired in a recent deal with Seren Innovations Inc.) and revenue up about 8%.

Cash-flow growth was flat at $471 million, largely due to increased operating expenses. Charter said operating expenses increased 13.4% in the period, or about $107 million, tied to its continuing investment in customer growth and retention and higher programming and marketing costs.

Charter had previously released preliminary results April 6 because it expected to present the information to potential investors as part of a debt refinancing.

Charter also reported stronger growth in new services -- digital additions of 69,800 (including 8,000 from Seren) in the period outpaced 19,900 a year ago, and high-speed-Internet customers rose by 126,000 (including 13,200 from Seren), ahead of the 94,000 addition in the same period of 2005.

Charter also saw a 54% increase in voice-over-Internet-protocol telephony customers, adding 69,600 (including 14,500 from Seren) during the period, compared with 9,900 additions a year ago.

“I think what we’re starting to see is consistency,” Charter CEO Neil Smit said in an interview. He noted that churn was down for the fifth consecutive quarter and average monthly revenue per unit rose to $77.64, up nearly 10% from $70.75 last year.

Charter increased its telephony footprint by 1 million homes in the quarter, ending the period with the service available to 3.9 million homes passed. Smit said the MSO is on track to reaching its goal of having telephony available to 6 million-8 million homes by the end of the year.

Charter also launched telephone service in Keller, Texas -- Verizon Communications Inc.’s first video market -- and Smit said he expects the addition of the triple play to help the cable company win back customers in that area.

“We’ll be competing on a level playing field with [Verizon], and we believe we’ll be very successful, as we have been in other markets with our bundled strategy,” Smit said on a conference call with analysts.

Charter launched telephone in seven additional markets in the quarter. While it is too soon to tell about the impact of those launches, chief operating officer Mike Lovett said on the conference call that in more mature markets like Madison, Wis. -- which has had phone service for about 18 months -- 45% of customers take either two or three products from Charter and are paying an average of about $130 per month for the triple play.

Charter’s promotional triple-play pricing starts at about $99 per month.

Smit said Charter has lost only about 5.5% market share in Keller, while Verizon claimed that it has nearly 30% penetration in the market.

Charter stock was down 4 cents each to $1.11 per share in afternoon trading Tuesday.

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