Vogel Raises Profile as Charter Stock Slides


In his first 100 days on the job, he's been preoccupied with restructuring management and setting Charter Communications Inc. on a course to grow new services, but president and CEO Carl Vogel may have to shift his priorities again.

The MSO's stock has slid more than 15 percent since Vogel joined the company in October.

Vogel came on board shortly after popular CEO Jerald Kent unexpectedly resigned on Sept. 24. And in his first few days, his main task was to ensure that key members of Charter's management team remained with the company.

During his first few weeks, Vogel achieved that by signing chief operating officer Dave Barford, chief financial officer Kent Kalkwarf and chief technology officer Steve Silva to long-term contracts.

Later, the company also decentralized its operational structure, reorganizing Charter into three divisions and 10 regional operations from two divisions and 12 regional operations. Vogel also continued to shift the company away from its industry-leading, basic subscriber growth — which once averaged 2 percent per year, twice the average of other MSOs — to a more manageable 1 percent.

Charter's stock price struggled after Kent announced his resignation, dropping more than 20 percent to $12 per share. The stock then rebounded to the pre-resignation level of $16 per share in December, before plummeting to the $10 range over the past few weeks.

While a lot of that decline can be attributed to concerns stemming from the Enron Corp. debacle, a decline in digital-subscriber growth and concerns about Charter's heavy debt load, Vogel said investors aren't looking at the whole picture.

The stock's falloff has had little to do with performance, said Vogel. And that was proven by Charter's fourth-quarter results, when revenue rose 14 percent and cash flow — before a one-time charge for transferring high-speed data customers from the Excite@Home network to Charter's own network — grew by 10.9 percent, in line with industry peers.

For the year, digital subscribers rose by 967,000 to 2.1 million and cable-modem customers increased by 379,000 to 607,000. For 2002, Charter expects to add between 550,000 and 600,000 digital customers and between 550,000 and 600,000 data customers.

The decline in the stock was due more to concerns about Charter's debt levels, a concern Vogel said is unwarranted, during a telephone interview last week.

"Part of the reason for the decline has been the poor perception of leverage," Vogel said. "We've got leverage of about 8 times cash flow, but we're in a low-interest-rate environment and we have plenty of liquidity. When you look at the surface, it looks like we have too much debt. But I don't know if people are doing a lot of drilling down."

Investors seem to be concentrating on Charter's leverage, and the fact that it and most other MSOs have predicted slower digital-subscriber growth this year, Vogel said. But they're not focusing on revenue and cash-flow growth, which are expected to be the same or higher than last year. Charter's guidance for 2002 calls for revenue growth of 12 percent to 14 percent and cash-flow growth of 11 percent to 13 percent.

"I probably need to be as visible or more visible [to the investment community] than I have been," Vogel said. "Personally, I'd rather spend more time in operations. But I will continue to deliver our message to the investment community."

Basic-subscriber growth will also decline this year, as directed by the company's decision to disconnect about 120,000 "slow-paying" customers in the first quarter. Although Charter said it hoped to win back the bulk of those customers through the innovative pricing of its digital packages, Vogel said that the 0.6 percent basic growth Charter experienced in 2001 will likely be lower in 2002.

The 120,000 customers that would be disconnected represent about 1.7 percent of Charter's total subscriber base of 6.9 million. Vogel said that about half of the customers to be disconnected are digital subscribers.

Despite that loss, Charter expects to add 70,000 digital susbcribers in the first quarter. That fact encouraged Salomon Smith Barney Inc. cable analyst Niraj Gupta, who wrote in a report that first-quarter digital additions reinforce his view that "demand for new services remains strong and the fundamentals of the business remain pretty good."

Disconnects indicate that Charter is concentrating on extracting the most value from its customer base, rather than artificially boosting unit growth, said Vogel.

Charter had started to eliminate deep discounts as high as $30 to $40 per month before Vogel signed on as CEO in October. He said that practice is now being "embraced in earnest."