(FROM THE WALL STREET JOURNAL 5/2/15)
By Shalini Ramachandran
Part of Charter Communications Inc.'s case for taking over Time
Warner Cable Inc. has been that it could do a better job running
its rival cable operator. First-quarter results from the companies
didn't do much to advance that argument.
Charter, the fourth-largest U.S. cable operator, reported
first-quarter earnings on Friday that some Wall Street analysts
found disappointing, due in part to a surprise loss of 7,000 video
customers, compared with a gain of 18,000 in the year-earlier
period.
On an earnings conference call, Charter Chief Executive Tom
Rutledge attributed the company's video customer decline in part to
Charter's changeover to digital cable TV transmission from analog.
He said that process is "very disruptive" to customers, though it
reaps benefits in the end. Charter shares edged up at $187.43
Friday.
Meanwhile, Time Warner Cable on Thursday reported that it added
video customers for the first time since 2009. The New York-based
operator was struggling badly with subscriber losses in 2013 when
Charter last tried to acquire it, but has since showed early signs
of a turnaround, analysts said. Still, the company's profit fell on
higher costs.
The dynamics between the companies have changed markedly, some
analysts said. Charter is still viewed on Wall Street as a well-run
company. But Time Warner Cable has gone from looking like a likely
target two years agoto a company in the position to be an
acquirer.
"Yesterday, Charter looked to have the inside track to begin its
roll-up of the cable industry. Today, that's less clear," said
Craig Moffett, analyst at MoffettNathanson LLC, in a research note
Friday.
The companies are jockeying for advantage after Comcast Corp.'s
merger with Time Warner Cable broke up. Charter has since been
laying the groundwork for a Time Warner Cable bid, as well as
holding preliminary talks with closely held Bright House Networks
LLC, The Wall Street Journal reported Thursday. Time Warner Cable
also has had preliminary talks with Bright House.
On the Friday call, Mr. Rutledge said "our focus was somewhat
distracted" in the quarter by the Comcast deal -- since Charter was
to acquire, swap and spin off some systems as part of that deal.
Overall, Charter posted a loss of $81 million, or 73 cents a share,
compared with a year-earlier loss of $37 million, or 35 cents a
share.
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