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Charter Communications had “an enormous amount of growth pulled forward” in its broadband business early in the COVID-19 pandemic, like other cable giants, which explains the currently weaker subscriber growth trends, chairman and CEO Tom Rutledge told investors Wednesday.
“Now you sort of have the opposite of that,” he told the virtual UBS Global Technology, Media and Telecom Conference. “You have the unwinding” of some people who set themselves up for broadband services quickly amid stay-at-home orders. Comcast’s stock fell Tuesday after the latest broadband forecasts from its cable unit CEO as investors have focused on the growth in what is nowadays the core business for cable giants.
Rutledge argued the longer-term broadband outlook remains strong, saying: “The overall broadband growth opportunity for the company is really more of an average kind of growth. … I do think that the opportunity to grow the business is pretty much unchanged and if you look at it on a four-, five-year growth rate trend, it is pretty solid and pretty straightforward and pretty consistent.”
Given Charter’s less than 16 million pay TV subscribers and around 32 million total customer relationships, “half of our customers don’t buy video from us anymore,” Rutledge highlighted. But selling more less-expensive video packages has helped the company as the rising cost for the traditional pay TV bundle has “priced a lot of people out of the marketplace,” he argued. “We are trying … to create as many packages as we can for customers to meet their needs” and keep cost pressures for them “as low as possible.”
Rutledge was also questioned about his appetite for acquisitions, as he has in the past expressed an interest in growing through takeovers. “We are still a regional player,” he argued Wednesday. “We compete against national companies — AT&T and Verizon, T-Mobile, Elon Musk,” DirecTV and others. “So there is a lot to be said for, even from a policy point of view, getting us to a national footprint.”
Rutledge said overall, “there are good arguments for why we can continue to do M&A,” but also added: “On the other hand, we don’t need it today.”
Asked about his 2022 priorities and expectations, the Charter CEO predicted a “return to normalcy kind of year for us,” adding: “We have gone through very disruptive last couple of years … and we have done really quite well.” He also touted mobile services as a big growth driver in 2022.
Entertainment giants have made traditional pay TV “unaffordable,” Charter CFO Chris Winfrey had said during a recent conference. “To the extent that programmers continue to increase their rates in a way that is … higher than customers can afford, you are going to see continuing losses, maybe even accelerating losses” of pay TV subscribers, he argued. “The programmers have not been able to get out of the prisoners’ dilemma of taking the additional rate increases and insisting on carriage and forcing multiple channels and cross-bundling requirements.”
Winfrey concluded that to help the health of the pay TV ecosystem, the sector would either need lower programming prices and/or increased flexibility for distributors like Charter “to package these products in a way that they can actually drive penetration.”
ViacomCBS and Charter recently unveiled multiyear distribution agreements for the continued carriage of the media company’s broadcast, entertainment, news and sports networks. The deals also cover the licensing of ViacomCBS’ suite of streaming services, including Paramount+, Pluto TV, BET+ and Noggin, for future distribution to Charter’s Spectrum customers.
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