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Cable operator Charter Communications, in which John Malone‘s Liberty Broadband owns a big stake and which has agreed to acquire Time Warner Cable, on Tuesday reported a widened second-quarter loss and continued video subscriber losses.
The company, led by CEO Tom Rutledge, reported a loss of $122 million, including a $128 million loss on the extinguishment of debt. That compared with a year-ago loss of $45 million. Charter said the latest quarterly loss also included $26 million of interest expense related to the Comcast transactions financing and $19 million of transactions costs related to planned Comcast, Time Warner Cable and Bright House Networks transactions.
Asked on Tuesday’s earnings conference call about skinny bundles and cord cutting, Rutledge said “skinny bundles are still bundles, they just cost less.” He argued that cord cutting was driven by the high cost of pay TV services. “Everybody wants everything, but it’s a cost issue,” he said.
Asked about possible a la carte pay TV models that could replace the traditional bundle, Rutledge said about the bundle that “there is nothing to [incentivize] anyone to pull it apart.” But he said Charter would like to offer tailored content packages for groups of consumers if content companies are flexible enough to do so. “Some of the content companies would suffer dramatically” if their channels are left out of such skinnier bundles, he acknowledged.
He has discussed the issue in the past, saying Tuesday that Charter was still “working through programming rights” and acknowledging that “we haven’t found that right mix yet and don’t think anyone else has either.”
Charter said its second-quarter adjusted earnings before interest, taxes, depreciation and amortization grew by 6.8 percent, or 8.9 percent when excluding transactions transition costs. Revenue rose 7.6 percent to $2.4 billion.
The cable firm lost 33,000 residential video subscribers in the latest period, ending June with 4.12 million residential video subscribers. In the year-ago period, the company had lost 29,000 residential video customers.
Overall residential customer units increased by 5 percent from the year-ago period to 5.96 million. Charter added 70,000 residential subscriber units in the second quarter, up from 55,000, as it signed up 70,000 broadband users, up from 49,000 in the year-ago period, and 33,000 telephony customers, compared with 35,000. Overall residential subscriber relationships rose by 34,000, which includes people taking more than one product, up from 27,000 in the year-ago period.
Charter had struck a deal with Comcast to buy some cable systems from it after Comcast’s planned takeover of Time Warner Cable, which the cable giant later had to abandon, making way for a Charter deal.
“Our second-quarter results demonstrate that our consistent focus on delivering superior products at highly-competitive prices, continues to drive our strong customer, revenue and cash flow growth,” said Rutledge. “We look forward to applying that same focus and strategy across New Charter, following the close of our transactions with Time Warner Cable and Bright House Networks. Our new company will drive significant investment into broadband infrastructure, delivering faster broadband speeds and better video products to our customers, while driving customer and cash flow growth for our shareholders.”
On the earnings conference call, Rutledge touted the planned TW Cable acquisition, saying the company was working to get regulatory approval and close it by year-end.
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He also touted the deal’s consumer benefits, saying “New Charter is in the public interest.” He touted the company’s plans to roll out wifi and broadband services, create jobs and improve customer service.
The CEO said Charter was “still a diamond in the rough,” but “we’re polishing the diamond.”
Twitter: @georgszalai
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