Charter optimistic despite Q3 loss

Smit 'pleased' with progress, touts 'growing momentum'

Charter Communications, the cable operator controlled by Paul Allen, swung to a third-quarter loss, but management said Tuesday that it was encouraged by otherwise improving operating momentum.

Still, concerns about the firm's cash burn rate and its ability to reach growth levels reported by its peers sent the stock down as low as $2.17 on Tuesday before it closed unchanged at $2.30. This follows a strong run recently that saw Charter as the top gainer for several days on The Hollywood Reporter Showbiz 50 stock index.

"The huge degree of cash burn far outweighs the modest improvement in operating fundamentals," Miller Tabak + Co. analyst David Joyce said.

Neil Smit, who took over as president and CEO a little more than a year ago, said he was "pleased" with Charter's progress and added that "our business is growing momentum," with revenue gains likely to be stronger next year.

Asked if the company could follow other cable companies that have recently been taken private or are considering such a move, Smit said: "I can't speak for Paul (Allen) and his intentions" as controlling shareholder. But he added management will continue to consider "all possibilities for the company."

He also said that St. Louis-based Charter will continue to look at further potential deals to sell or acquire cable systems to maximize its asset base. However, amid a recent return of market chatter about a possible sale of its Los Angeles cable systems, management said they had no deals to comment on right now.

Charter on Tuesday reported a loss of $133 million, compared with a profit of $75 million a year ago, with the company citing a lower gain on debt extinguishments.

Revenue rose 9.7% to $1.4 billion, driven by advanced-service subscriber gains as 210,300 additions in revenue-generating units outpaced the year-ago figures by 20%.

Charter said it lost 9,200 basic cable subscribers to stand at just less than 5.5 million as of Sept. 30, but it added 82,000 telephony customers during the third quarter to end with 339,600. It also won 88,100 new high-speed Internet users to hit 2.3 million, as well as 49,400 digital-video subscribers to reach nearly 2.8 million overall.

Smit said Charter remains in the early stages of rolling out its telephony service but sees "significant opportunity." Just like at other cable firms, customers subscribing to the triple-play bundle of TV, Web and telephone services are less likely to switch over to satellite competitors, he added.

Meanwhile, Charter's industry-leading long-term debt stood at $18.8 billion as of Sept. 30, with cash on hand of $85 million.
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