Charter plots course for funding

Q4 improves, but free-cash-flow deficit troubles Street

Charter Communications on Wednesday reported mostly improved fourth-quarter financials, but concerns about the cable operator's midterm liquidity resurfaced.

"Charter is guiding to second- or third-quarter 2009 as the end of their available liquidity," Miller Tabak + Co. analyst David Joyce said. "So they need funding in the first half of 2009."

While that was in line with previous management guidance that they had enough cash and borrowing capacity through 2008, Charter's fourth-quarter free-cash-flow deficit of $305 million was bigger than Wall Street expected.

"We thought the company would manage its cash burn better," Joyce said.

Charter president and CEO Neil Smit and other Charter executives said during a conference call Wednesday that they will explore all options when it comes to raising liquidity at a time of tough credit markets. Smit vowed balance sheet issues will not distract his team from executing well.

St. Louis-based Charter said fourth-quarter revenue rose 9.9%, or 10.6% on a pro-forma basis, to $1.6 billion.

Charter added 199,100 revenue-generating units on a pro-forma basis, up 19.9% year-over-year.

It finished the year with about 5.2 million basic cable customers, 2.9 million digital video, 2.7 million broadband and 959,300 telephony users. Since then, Charter has exceeded the 1 million telephony-user milestone.

In the fourth quarter, Charter lost 66,400 basic subscribers and added 59,700 digital video, 50,500 broadband and 155,300 telephone customers.

For 2007, the cable firm added 835,900 RGUs, up 15.3%. It lost 116,300 basic users in 2007.

In its fourth quarter, average revenue per customer increased 12.9% year-over-year to $97.99, driven by higher sales of service bundles and advanced services.

"I am pleased with the consistency of Charter's performance and its continuing success in building operational momentum," said Paul Allen, chairman and controlling shareholder. "I am encouraged about the prospects for Charter as we continue to improve the experience for our customers."

Smit also lauded the firm's fifth consecutive quarter of double-digit pro-forma revenue and operating-cash-flow growth and vowed to maintain improved momentum.

Charter shares closed down 4.6% on Wednesday at $1.03.