How Can Charter Be More like Cablevision, Analysts Ask
With ex-Cablevision executive Tom Rutledge now in charge of Charter Communications, analysts want to know how some of the strategies he deployed as chief operating officer of Cablevision might translate to Charter. During Charter’s Q4 earnings teleconference Monday, Rutledge fielded question after question about what new products or tactics Charter could introduce soon. In response, Rutledge largely stuck to his script: “We have a network that is highly capable from a physical perspective,” he said. It was a theme he repeated several times during the discussion.
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In some ways, Charter and Cablevision could not be more different, Citi analyst Jason Bazinet said while setting a question to Rutledge about which of Cablevision’s successful initiatives would be a priority at Charter. For instance, Bazinet said Cablevision’s systems are highly clustered, enjoy high video penetration, relatively low competition from DBS providers but high exposure to Verizon’s FiOS footprint. Bazinet said Charter’s systems are more spread out, rural, have much lower video penetration, higher DBS competition and face competition largely from AT&T’s U-verse service rather than FiOS.
The first priority is to introduce a strong all-digital product for new subscribers and then set a plan to recapture analog bandwidth, Rutledge said. “How soon we turn off analog, I have yet to determine.” Other products such as remote-storage DVRs are probably a longer way off, he said. “While I think RS-DVR is a strategy for enhancing the value of the network” while lowering company spending on set-top boxes, “I'm not sure it’s an immediate priority for Charter,” he said. The company is early-on in its transition to systems that carry all digital channels and none in analog (CD Feb 22 p8).
"Charter isn’t Cablevision,” Rutledge said. But the opportunities are large, he said. Charter’s network already passes 12 million households, he said. That leaves plenty of room to increase the size of its video business without the need for acquisitions, he said. “It’s true that it’s less clustered, which requires different kinds of marketing strategies and tactics, but I think those tactics are available to us."
Charter’s plans to market TiVo boxes across its service area are behind schedule, executives said. The company had been testing the boxes in its Fort Worth, Texas, systems and had planned to introduce the service across the entire company by July. But testing with some households with company employees or friends of staff living there has revealed that it will take longer to integrate Charter’s VOD systems with the TiVo boxes, said Don Detampel, executive vice president of technology for Charter. “We're not going to deliver that product to our customers until we know it’s fully-baked and right,” he said. “We remain very committed to the TiVo platform."
Charter lost 47,000 video subscribers in Q4, about 27 percent fewer than it lost during the same quarter a year earlier. It added 67,700 broadband subscribers, more than double the amount it added a year earlier. Its phone net loss widened 12 percent from a year earlier to 27,500 customers. Charter ended the quarter with 4.09 million video customers, 3.49 million broadband customers and 1.79 million phone customers. Total sales gained 2.6 percent from a year earlier to $1.83 billion while net loss of $67 million was a 4 percent improvement from a year earlier.