Charter Reports Second-Quarter Loss as Video Losses Accumulate

Charter Communications Inc. (CHTR), the fourth-largest U.S. cable company, reported a second-quarter loss as TV subscriber defections exceeded analyst projections.

Charter’s net loss widened to $96 million, or 96 cents a share, from $83 million, or 84 cents, a year earlier, the Stamford, Connecticut-based company said in a statement. Sales were $1.97 billion, compared with the average analyst estimate of $1.96 billion, according to data compiled by Bloomberg.

Charter needs to show its pricing and promotional strategies will pay off, said Vijay Jayant, an analyst at ISI Group in New York, in an interview before the results were released. The third quarter must produce improvements in video subscriptions and earnings, he said.

“This quarter is sort of a free pass because Charter instituted its new triple play pricing last year in June, so investors will be looking for double-digit year-over-year growth next quarter,” said Jayant, who rates the company a buy. “Of course, if Charter is involved in an M&A transaction, that’ll change the narrative.”

The cable provider is studying mergers with bigger companies. John Malone’s Liberty Media Corp. (LMCA), which owns 27 percent of Charter, is pushing the company to pursue an acquisition of Time Warner Cable Inc. (TWC) or a combination with Cox Communications Inc., people familiar with the matter have said.

Charter lost 48,000 residential video customers, a larger decline than the 36,000 average estimate of six analysts surveyed by Bloomberg. Charter gained 40,000 broadband subscribers, more than the 33,000 average analyst projection.

The motivation to get bigger is driven by increased programming costs, Craig Moffett, an analyst at Moffett Research LLC in New York, said in an interview. It’s the biggest reason Malone and Rutledge are pushing for a merger to gain scale.

“Charter, more than anyone, needs to do something to change the trajectory of programming costs,” Moffett said.

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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