Charter Communications continues to be challenged by churn associated with the expiration of promotional deals and what it calls “limited basic” video services as it transitions Time Warner Cable customers under its Spectrum brand.
In all, Charter lost 105,000 former TWC pay-TV customers in the fourth quarter, offsetting gains of 34,000 video subscribers in the Florida footprint of another recently acquired system, Bright House Networks, as well as 20,000 video subs gained in the legacy Charter footprint. The MSO lost 51,000 video users overall in the fourth quarter.
To date, Charter said it was about 50% finished with the transition to Spectrum pricing and packaging in its acquired systems as of December 31. Charter Chairman and CEO Tom Rutledge was asked during today’s earnings call if he thought the TWC churn would continue, at least in the short term.
“I think that would be reasonable,” he said. “We’ve gotten some control over it … I think we can mitigate some of the churn through better management of the step-up process.”
Jefferies analyst Mike McCormack had predicted the company would add around 60,000 video subscribers in the quarter. Charter added 357,000 broadband users in the fourth quarter, also missing the analyst’s forecast of around 435,000 additions. Residential internet additions for TWC came in at 155,000, down from 281,000 in the fourth quarter of 2015.
“Although TWC weakness was anticipated, the magnitude was greater than expected,” McCormack said.
Charter did, however, meet forecast on revenue, with “pro forma” revenue for the combined New Charter rising 7.2% to $10.27 billion. Fourth-quarter EBITDA of $3.9 billion grew 12.7% and was also in line with analyst expectations.
Asked by one investment analyst about Charter’s projection that it would reap $800 million in synergies in the first three years after purchasing TWC and Bright House, Rutledge said the company is on track. “We think we got the synergies we’d get,” he said.