Charter CEO Talks Bright House Deal, Integration of Streaming Services

AP Photo/Richard Drew

Tom Rutledge on an earnings call also discusses an abandoned acquisition of cable systems that was contingent upon the failed Comcast-Time Warner Cable combination.

Charter Communications CEO Tom Rutledge on Friday touched on some elements of the deals approach that the cable operator would take after the failed Comcast-Time Warner Cable deal.

Charter was set to acquire some cable systems from the combined firm, but that agreement was contingent upon the completion of the abandoned mega-deal. Since it originally also approached TW Cable in an attempt to buy the firm, Charter is widely expected to hold new deal talks with the company in the near future.

Addressing Charter's deal plans indirectly in his prepared remarks, Rutledge told the company's first-quarter earnings conference call on Friday: "Charter remains in an excellent position to grow its business organically by additional market share gains, with or without M&A." He didn't directly address his interest in TW Cable.

But he did comment on the company's plan to acquire Bright House, the cable operator run by Advance/Newhouse, for $10.4 billion, which was also contingent upon the Comcast deal closing, Rutledge said it “requires that we negotiate in good faith” upon termination of the Comcast transaction, “and we are doing that.” He said he would not have further comment. “I want to compliment the quality of the Bright House assets and the management team," he added.

The Wall Street Journal had reported that TW Cable also reached out to Advance/Newhouse about a possible deal after the Comcast transaction failed, while Charter was renegotiating its deal.

Talking about the failed Comcast deal and its effect on Charter, Rutledge said Friday: "We put a significant amount of time and effort and money into completing our transactions with Comcast. Obviously, we are disappointed that our transactions did not close, but I am pleased that we continued to grow our core business and we put ourselves in a better position to acquire the 6.5 million unserved passings in our footprint."

He also discussed possible skinny pay TV packages and competition from streaming video services, reiterating previous comments that he would like to integrate them into the firm's services. "We have been considering ways to provide compelling services and packages at lower retail price points with a lower content cost structure and with the inclusion of direct to consumer services," he said, later explaining he was referring to the likes of Netflix, Hulu and HBO Now. "We can mix those products into products that we sell" inside the Charter footprint to appeal to an underserved market segment, he said.

Rutledge added: “We haven’t found that product mix yet, and we don’t think anyone else has either, therefore we remain focused on the opportunity to provide high-quality television service with a modern interface … and grow our video business further.” He said Charter sees video growth ahead given the company's strong video product.

Cord cutting is driven by household formation and income trends, as well as increasing broadband usage, Rutledge said. "But it is also a reality that people like the full [pay TV] service," he said, but Charter wants to also service people who can't afford the full package, he said.

Asked about video subscriber declines in the first quarter, Rutledge said the company continues to focus on improving its services, and customer satisfaction and churn rates are improving. But he also acknowledged: "Our focus was somewhat distracted."

Twitter: @georgszalai