Charter CEO Sees Opportunity for 'Significant' Upside at Cable Operator
At a UBS conference, former Cablevision top executive Tom Rutledge also discusses potential acquisitions and a possible Dish-DirecTV merger.
About 10 months after leaving Cablevision Systems to become CEO of larger cable operator Charter Communications, Tom Rutledge on Monday told an investor conference that he sees much upside potential at the company.
He said at the 40th annual UBS Global Media and Communications Conference here that many parts of the company are in top shape, but others need upgrades and more work. "The thing that shocked me the most is that in some places it is Taj Mahal, in others it is not," he said when asked what most surprised him about the state of Charter after he came on board.
Rutledge lauded first-class call centers, but said the company, which went through a Chapter 11 bankruptcy restructuring a few years ago, uses more analog TV that he had thought, for example.
"The fundamentals of the business are the opportunity at Charter," he said. If the company runs its core business better, Charter can grow "significantly," he argued.
"We have the opportunity to take a low-penetrated operation and make it a high-penetrated operation," Rutledge explained further. He pointed out that there are more satellite TV than cable customers in Charter's markets, providing more upside than at other companies. "To me that's the opportunity - market share," he said.
Rutledge also said he sees big opportunity for the cable industry in cloud-based user interfaces and guides, which bring content search functionality to smartphones and tablets. "It's a real opportunity for us," he said.
Comparing Charter's cable products to competitors' services, Rutledge said that the triple-play bundle is "superior" to satellite TV and telecom companies' offers.
For example, Charter's broadband services are "vastly superior" with speeds being about 10 times that of typical DSL speeds, Rutledge said. "With increased broadband use, we think our network is what customers will expect."
Asked about Verizon's FiOS, which is available in 4 percent of homes in Charter's market, the CEO said it is mainly a "me-too product" that is very expensive to deploy, making returns on invested capital unlikely. The AT&T network is "a little less capable," he added.
Asked about a potential combination of satellite TV giants DirecTV and Dish Network that has repeatedly been rumored over the years, Rutledge said it is "hard to believe they would get it done" in terms of getting regulatory approval.
He added: "They would have enormous power over programmers...I would be opposed to it."
Rutledge was also asked if Charter could be looking for deals. Some on Wall Street have wondered if the firm could bid for the former assets of Bresnan Communications "I feel good about our assets," and there is "no need" for acquisitions, the CEO said. "That doesn't mean we wouldn't do it."
Rutledge also said that Charter will turn off its analog TV service over time to make spectrum available for more HD or broadband offers. Not only is the digital picture better, but it also improves the security of the technology network and. ensures higher revenue, he said.
Asked about broadband content, or so-called over-the-top services, Rutledge said content companies in particular must consider their business models in this regard. If content became available in ways that hurt the traditional pay TV system, it could hurt relationships with cable and other distributors, he said.