Charter Loses 112,000 Pay TV Subs in First Quarter

Charter CEO Tom Rutledge
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Charter CEO Tom Rutledge

The company, led by CEO Tom Rutledge, saw its share price plunge as investors question how the cable giant can hold TV customers amid cord-cutting.

Cable operator Charter Communications, in which John Malone's Liberty Broadband owns a big stake, on Friday reported its first-quarter financials and subscriber trends, which included a loss of 122,000 residential pay TV subs, compared with 100,000 in the year-ago period.

That subscriber loss led shares in the U.S. cable giant to plunge by $42.22, or just over 14 percent, to $255.93 in late morning trading on the NASDAQ Exchange.

The $55 billion acquisition of Time Warner Cable and the $10.4 billion purchase of Bright House in May of 2016 made Charter — led by chairman, president and CEO Tom Rutledge — the second-biggest U.S. cable company behind Comcast.

But that added scale has not allowed Charter to escape subscriber losses as Netflix and other new digital players upend the domestic cable TV business.

Charter said Friday that it lost 112,000 net pay TV subscribers in the first quarter, compared with a loss of around 89,000 in the year-ago period. The loss of residential pay TV subs was partially offset by a 10,000 gain in small and medium business subscribers.

Rutledge and CFO Christopher Winfrey were on their heels during a morning analyst call as they defended their current growth strategy against questions over their ability to retain cable TV subscribers in a fast-changing video environment.

"While we think we will make a great video product available to our customers ... if we're off in our forecast of that, it's not significantly financially material to our growth prospects," Rutledge told analysts.

He insisted Charter remained committed to its current video strategy, which includes faster broadband Internet speeds and more video product. "It's hard to explain market reactions, but our activity and our project management is going as we expected and the kind of marketplace acceptance of our product is going as we expected," Rutledge said.

And Winfrey said Charter experienced the same disruption when earlier absorbing Time Warner Cable and Bright House Networks assets, and the current digital overhaul would be as successful. "We're turning a lot of knobs, same as we did with legacy Charter, and there's a lot of moving parts. But the trajectory looks as good as ever," he said.

Rutledge reiterated his preference for not acquiring a content company to own video assets by following the AT&T deal for Time Warner and Comcast acquiring NBCUniversal. "I think we're strategically complete. We think we can execute our business plan with the assets we have. I don't think we need to own content to do better," he said.

"We will have access to video. We launched Netflix on our network. We will integrate all the video products. But that doesn't require us to own video assets, per se," Rutledge told analysts.

As part of its latest financial results, Charter saw high-speed internet subscriber growth of 362,000 in the first quarter, including 331,000 residential subs, compared with 458,000, including 428,000 residential subs, in the same period of 2017.

Charter's first-quarter profit of $168 million compared with a year-ago profit of $155 million. Revenue rose 4.9 percent to $10.7 billion.

April 27, 12:15 pm. Update with comments by top Charter Communications execs during an analyst call.