Updated: 2-Charter plan aims to cut 2 billions USD in costs through "fundamental restructuring" to revive growth

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Anzar Mehraj

Reuters, November 6 - Charter Communications (CHTR.O) said on Friday that as part of a reform of its business model, the company will cut $2 billion in annualized operating costs over the next 18 months, aiming to revive growth momentum in the fiercely competitive cable television and broadband markets.

The company's share price fell 2.7% in early trading. As of Thursday's close, its share price had fallen 39.7% so far this year.

Charter said it will restructure the marketing and sales of its core internet services, relying more on mobile and video products to increase user numbers and boost retention rates.

Charter CEO Chris Winfrey said on the earnings call that the company "failed to achieve the expected user growth and performance."

This cost reduction initiative is unrelated to the more than $1 billion in synergies anticipated from Charter's acquisition of Cox Communications (link), a deal that was closed on August 19.

This $34.5 billion deal, including debt, merges two of the largest cable TV and broadband operators in the US, while Netflix NFLX.O, Disney+ DIS.N, Verizon VZ.N, and T-Mobile TMUS.O are intensifying the battle for customers.

On an adjusted basis, Charter lost 233,000 internet users in the third quarter, compared with a loss of 171,000 in the prior year period; video users fell by 77,000, compared with a loss of 121,000 last year.

"Charter's increasingly severe broadband user losses are worrying and highlight the scale of the challenge," said PP Foresight founder Paolo Pescatore.

He added that while the $2 billion cost reduction plan is necessary, "cost cuts alone are not enough to return to a growth trajectory."

According to LSEG data, Charter reported third-quarter revenue of $14.9 billion on Friday, below analysts’ average estimate of $15.03 billion.

Affected by a $6.3 billion franchise impairment charge, the company reported a net loss of $20.50 per share, compared with earnings of $8.50 per share a year earlier.

As of the end of September, the company had total debt of $108.6 billion and cash reserves of $573 million.

In addition, Reuters reported on Tuesday (link) that India’s Jio Platforms has been in talks with Charter and Comcast to license its wireless broadband technology in exchange for a potential equity stake.

(To make it easier for non-native English speakers, Reuters has automated translations of its reports into several other languages. Because automated translations may be inaccurate or lack necessary context, Reuters does not guarantee the accuracy of the translated text, which is provided for convenience only. Reuters accepts no liability for any damage or loss arising from the use of automated translation functionality.)