Vogel's Back, as Charter CEO

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Paul Allen finally got his man last week: Allen's Charter Communications Inc. signed longtime cable and satellite executive Carl Vogel as president and CEO, replacing Jerald Kent, who resigned unexpectedly three weeks ago.

Vogel was rumored to be the front-runner almost from the moment Kent announced his resignation on Sept. 24. Now, with the formalities of signing an employment contract out of the way, Vogel can establish himself on Wall Street while reassuring investors and analysts that he won't damage a good thing.

Charter has taken some lumps since Kent's resignation. The stock quickly declined by about 20 percent. Last week, Goldman Sachs & Co. analyst Richard Greenfield trimmed 2001 revenue and cash-flow estimates for Charter, saying in part that "Charter management must reestablish its credibility in terms of the strength of its operating results as well as its vision, which we believe will take time."

Much of Vogel's 20 years of experience in pay TV was gained with direct-broadcast satellite companies, including EchoStar Communications Corp. and PrimeStar Inc. He did serve a five-month stint at AT&T Broadband in 1999 and held several executive jobs at MSO Jones Intercable Inc. in the 1980s.

In Vogel's favor, Charter has always deferred much decision-making power to system-level executives. "I think that's a huge positive," he said. "We have a strong COO and CFO," he added, referring to chief operating officer David Barford and chief financial officer Kent Kalkwarf.

He also mentioned Trey Smith, the Western division senior vice president, and David McCall, the Eastern division senior vice president, as "strong, seasoned operations managers."

Vogel has been under Wall Street's radar for some time, but he said he has already been in touch with several industry analysts and plans to be visible again.

"At Liberty [Media Corp.] I was asked to play a different role," Vogel said. "I look forward to getting involved with Wall Street. Those that don't know me are pretty young and those that do, I look forward to reconnecting."

Vogel said investors can be reassured that he has no radical changes in mind.

"We'll continue to do what we have been doing," Vogel said. "This is a great entrepreneurial culture and I want to perpetuate that. But this isn't something that's broken and I have to fix it. I will continue to build on our successes and have inherited a great set of assets to do that."

Some analysts had speculated Charter might focus more on high-speed data at the expense of digital cable. Charter has aggressively pushed digital cable, adding nearly 1.5 million subscribers in the last year alone. On the high-speed data front, Charter has been a little less aggressive, adding about 335,000 subscribers over that span.

Charter spokesman David Andersen said that the company had focused more on digital than data because cable-modem service requires two-way plant, something that Charter didn't have a lot of at the time.

Vogel said that because more of its plant is two-way capable — about 59 percent of Charter's footprint was two-way capable as of June 30 — Charter can be more aggressive in its data rollout.

"[But] I don't see [digital and data] as being mutually exclusive," he added. "Data is a tremendous product in terms of competition and it is certainly something I would focus on. It is something that will grow significantly over time."

Earlier this month, Charter said it would exceed previous estimates of 2 million subscribers by year-end. The company also said it would reach 640,000 subscribers for data, up 52 percent over its 419,000 customers in the second quarter.

Vogel added that he would not accelerate the rollout of new services, like video on demand and interactive offerings.

"We're in the process of evaluating our 2002 plans," Vogel said. "As they get more defined, we will have a lot more to say."

After Kent resigned, Charter locked Barford and Kalkwarf in to long-term deals. In addition to slight boosts in salary, Barford and Kalkwarf received stock options at $11.99 per share.

According to Securities and Exchange Commission documents filed Oct. 10, Kalkwarf and Barford each received options for 750,000 shares of Charter stock. According to the documents, 25 percent of those options vest immediately, with the rest vesting in 36 monthly installments that begin Nov. 1, 2002.

While it is unlikely both men would exercise those options immediately — Charter's stock closed at $13 on Oct. 11, up 64 cents — they do have the incentive to help bring Charter's share price back to its pre-Kent resignation days, when it traded at about $18 per share. At that price, the options are worth about $4.5 million apiece.

Some analysts expected Charter to reach similar long-term pacts with other senior managers. Vogel said that won't be the case. He said a stock option plan for all employees — at $12 per share — should be incentive enough.

"I'm in great shape there," Vogel said. "The board gave significant option grants at favorable prices. I'm not expecting to [announce additional long-term agreements]."

But options weren't enough to hold senior vice president of marketing Mary Pat Blake, who said last week she would leave Charter on Oct. 19.

"To the extent that people feel they have to leave, I'm confident we have got a pretty deep bench," Vogel said. "I don't see that as a problem."

Vogel — who was named to Charter's executive committee, joining Allen, vice chairman Marc Nathanson and Vulcan Ventures Inc. president William Savoy — also doesn't see any repeat of Charter's CEO having problems with its chairman, billionaire Allen.

"I don't see that as a particular problem, and in my discussions with the board I didn't get anything that caused me any pause," Vogel said.

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