While the ink struggled to dry on its three-tiered systems deal with Comcast on Monday, Charter Communications continued to present a strong case for organic growth, reporting strong first-quarter results, including better than expected video subscriber growth.
Earlier in the day Comcast and Charter announced a complicated series of deals involving sales, swaps and spin-offs that would effectively double Charter’s managed systems footprint to about 8.2 million customers. In the meantime, Charter showed that it can manage to grow video customers on its own as well.
Charter added 18,000 video customers in the period, better than the 25,000 it lost in the same period last year and making it just the second publicly traded operator beside Comcast to post a gain in the first quarter. At the same time, Charter maintained strong additions in high speed data (136,000 vs. 107,000 last year) and had a slightly weaker telephony increase (52,000 vs. 58,000 last year). The strong subscriber growth helped drive revenue up 7.5% in the period to $2.2 billion and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) up 7.3% to $767 million.
On a conference call with analysts Monday, Charter CEO Tom Rutledge said that although it is still early stages, Charter is winning market share through better customer service and products.
For the period, total customer relationships grew by 112,000, almost twice the 61,000 additions last year. And over the last 12 months, Charter residential customer base grew 4.1% while revenue per household jumped 2.8%.
But he stopped short of predicting further gains, adding that the second quarter is usually a seasonal one as students and vacationers disconnect service for the summer residences.
“Our customers see the difference, which translates into strong financial performance as we improve the fundamental blocking and tackling in a high volume transaction and services environment,” Rutledge said. “We also positioned our current product set to further distance ourselves from the competition.”
In a research note, ISI Group analysts Vijay Jayant and David Joyce said Charter’s all-digital migration is playing a role in customer growth as is its enhanced pricing and packaging strategy – for example the company has boosted minimum high-speed data speeds to 30 megabits per second in several markets.
“Several quarters of investment in customer service are proving fruitful,” the analysts wrote. “We think the continued improvement in subscriber trends and the accelerated all-digital initiative should be positives for EBITDA acceleration over the next two years.”
