Charter/TWC/BHN Still Could See Q1 FCC and DOJ Approval, CEO Rutledge Says
Charter Communications still hopes to see federal approval of its $89.1 billion takeovers of Bright House Networks and Time Warner Cable by the end of March, CEO Tom Rutledge said on a conference call Thursday on FY 2015 financial results. "We're reasonably confident the FCC and DOJ [Department of Justice] are on track to stay within the [180-day] shot clock," Rutledge said. As of Thursday, it stood at 131 days.
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Aside from federal regulatory approval, the deals still need state approval from regulators in California, Hawaii and New Jersey, with the California Public Utility Commission's stated June deadline (see 1511270047) "the only thing that would extend ... out" the close of the deals, Rutledge said, saying the company hasn't gotten feedback from the state regulator about its motion for an expedited calendar that would see CPUC deciding by April 21.
The company's three chief 2016 priorities are customer growth, improving its product set and closing on and integrating BHN/TWC, Rutledge said, saying one route to customer growth is that there won't be notable price hikes in 2016, after relatively flat prices in 2015. In a note to investors Thursday, Wells Fargo Senior Analyst Marci Ryvicker said Charter's flat pricing comments "might be deal related, meaning why step into anything that could trigger some adverse FCC response even if it would be in the normal course of business?" She also said Charter "has consistently favored volume over pricing."
Rutledge said the company has hired 7,000 over the past four years as it brought customer service in house, which also has contributed to lower customer churn. New Charter will likely have to hire 20,000 as it extends that model to BHN/TWC, he said. There will also be broader rollout this year of its cloud-based Spectrum Guide, which will integrate third-party video such as Hulu, YouTube and Netflix, Rutledge said. Assuming it closes on BHN/TWC this year, he said, Charter will begin integration of the Spectrum Guide for those customers this year, he said. Charter also has begun rollout of its Spectrum Wi-Fi, which provides unlimited out-of-home broadband to subscribers, he said. While modems to enable DOCSIS 3.1 Internet will be available later this year, Charter doesn't have a specific plan yet for deploying them this year, Rutledge said. Over the next 18 months, as DOCSIS 3.1 becomes more available in "commercially deployable pricing," the company will start moving to it, he said.
Meanwhile, Charter likely won't take part in the upcoming low-band spectrum auction because it still is going through regulatory approval for BHN/TWC and both are in mobile virtual network operator contracts, Rutledge said. "We have a lot of unknowns in terms of our ability to participate," he said.
For the quarter, Charter had revenue of $2.5 billion, up 6.5 percent. It said the year was its first in more than a decade where it grew total video customers, adding 11,000 for the year and 33,000 in the fourth quarter. It also added 129,000 Internet customers in the quarter and 57,000 voice customers, roughly consistent with the same quarter a year earlier. Programming costs for the quarter were $674 million, up 7.9 percent due to contractual rate increases, new channels and higher penetration of tiers, Rutledge said. The company didn't give guidance on programming costs for 2016. Charter stock closed Thursday at $170.50, down 3.4 percent.