Having completed its digital transition and the rollout of the Charter Spectrum triple play product suite on schedule, with its 200 HD channels and 60Mbps internet connection, Charter CEO Tom Rutledge said “we have now unleashed the capabilities of our high capacity two-way interactive network, freeing network capacity we can utilize for years to come.”
Rutledge also added that the Q4 figures prove that its new products have generated strong market share growth across all of its business areas, with customer growth still driving “improving financial performance, with reduced capital intensity going forward.”
Total revenues stand at $2.36 billion for the quarter, up 9.9% over the prior-year period, with EBITDA reported as $845 million, up 10.5% year on year. The company reported a net loss of $48 million however, largely attributed to $67 million of interest expenses related to the ongoing Comcast transaction financing and a 9.6% increase in operating costs and expenses.
The full year results for 2014 were reported as total revenue of $9.11 billion, up 11.7%, EBITDA of $3.19 billion, up 11.6%, and an EBITDA margin of 35%. Charter’s full year net loss was $183 million, with free cash flow of $171 million. Capex was 24.4% of total revenues, at $2.22 billion, and Opex was $5.92 billion.
Charter CFO Christopher Winfrey said that the biggest drivers in Opex were total programming expenses, which grew by $64 million, and the transition costs related to the Comcast-TWC deal that will see Charter take on a proportion of the new venture’s customers in order to appease regulator monopoly concerns – if the FCC decides to allow the deal to go ahead after months of intense public pressure.
Other notable operating costs disclosed by Winfrey included higher labor costs and the in-sourcing of IT. Of Q4’s $543 million in capex, the CFO said around one third of the spend was on CPE. Of the full year’s $2.2 billion in capex, around $400 million has been spent on the digital rollout.
In terms of its footprint, Charter reported 12.87 million video passings, which was unchanged year on year, with 12.57 million internet passings and 12.08 million voice passings – both up 1% compared to the same quarter last year. It reports that it has achieved 33.4% video penetration, down half a percent year on year, 40.4% internet penetration, up 3.3% in a year, and 21.7% penetration of its passed voice lines, up 1.4% year on year.
Charter says this gives it 4.16 million video customers, 4.77 million internet subscribers and 2.44 million voice customers. Video was unchanged year on year, but internet and voice increased 9% and 7% respectively. The company says it has achieved 98.5% digital penetration, up from 91.8% in 4Q2013, with 38% of its customers single play packages, 29.1% double play, and 32.8% triple play. Monthly ARPU for its residential customers was listed as $111.52, up 3% from last year’s Q4.
On the enterprise side of the business, denoted as “commercial” by Charter, it reported 133,000 video customers (up 19% year on year), 306,000 internet customers (also up 19%), and 180,000 voice customers (up 24%).
Charter’s commercial revenues were up 16.1% year on year, rising to $262 million, and largely driven by higher demand from SMB’s and carrier customers. Advertising sales were another strong area of growth for Charter, which saw the sector up 28% compared to Q4 2013. The company said this was largely due to increased political advertising revenue, excluding which, the division was still up 8.9% year on year.
This gives Charter $1.1 billion in quarterly video revenues, up 8.1% compared to the previous year’s Q4, and $670 million in internet revenue, up 13.5% year on year. The higher rise in internet earnings is being attributed to the increase of customers, a promotional roll-off, legacy price adjustments and higher revenue allocation from its bundles. However, voice revenues were down 9.7% versus 4Q2013, to $139 million, due to value-based pricing and the aforementioned bundled revenue allocation.
On the conference call for the results, Rutledge updated the audience on the progress of the Comcast-TWC deal. “We’re making good progress on the regulatory front and have the necessary financing for the TWC portion of the transaction. We will close the transaction after Comcast closes its deal with TWC and once the spin-off financing for GreatLand is complete.” Never going to happen Tom.