Charter’s 1Q20 results show that cable operators can weather this pandemic and build up subscribers, with metrics on all fronts exceeding expectations. Broadband led the way with an eye-popping 582K net adds-60% higher than an already raised consensus. Of those adds, 119K adds were for its free 60-day internet offer for homes with students and educators. Many of those joining for free are bringing in money, with 50% of the participants who sign up adding (and paying for) additional services, such as video, mobile or wireline phone. That, coupled with people watching more TV, might help explain why Charter actually saw improvement on the video side, with losses coming in at 70K vs 145K a year ago. Even Charter Mobile, which has seen demand lessen during the pandemic, beat expectations with 290K adds in the quarter. “Charter’s results, combined with Altice USA’s are clear evidence that even cable companies with high levels of exposure to COVID hotspots continue to perform well, driven by their attractive broadband products,” Evercore ISI analysts said. Like hundreds of ISPs, Charter has committed to not disconnect subs whose ability to pay is impacted by COVID-19. At the end of the quarter, 140K residential customers had requested that protection. Currently, 67K of those customers now have past due balances beyond the point of normal disconnection. CFO Chris Winfrey promised to disclose bad debt and revenue impacts, adding that the goal is not to quickly get people into a collection environment and cut off from service. CEO Tom Rutledge said he’s confident Charter can create valuable customer relationships. “When I look at the customers that we’re creating, they’re taking our high-quality products in the residential space and from a profile perspective they look like the customers we’ve always created. They’re going to be affected by the macro climate, obviously, but we have products that we can sell to those customers that have value regardless of where they fall on the income range,” Rutledge said. “We sell to very poor people and we sell to very rich people. We have a product mix that can work across the entire marketplace.” Charter’s results illustrate how trends have been accelerated by the COVID-19 crisis. The MSO started 1Q with about 55% of its business in the form of self-installs. That ratcheted up to 70% during the quarter and is now at more than 90%. Altice USA, however, said it’s about 12 months away from a self-install push-partly because it hasn’t been a priority because of the lack of a ubiquitous product offering. “The cost of the self-installation is about 1/3 of the cost of a professional install,” according to Winfrey. “The benefit goes to opex and capex, depending on what type of installation. It’s significant, but keep in mind we were already at 55% and would have been at 70% by the end of the quarter absent the acceleration.” Charter saw 1Q revenue climb 4.7% YOY to $11.74bln, with EBITDA up 8.4% YOY. Pivotal Research labeled Charter “bulletproof” and raised its year-end price target to $700, a $75 increase. “In the current quarter Charter will cross a major milestone as high (80+%) EBITDA margin residential data revenue will replace low margin (10-15%) pay TV revenue as the primary revenue source for the company,” the firm said, adding that it expects a relatively muted economic weakness effecting Charter’s advertising and SMB.
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