CHTR

Charter Communications, Inc. (CHTR)

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Exchange: NASDAQ
Industry: Consumer Services
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Charter Communications, Inc. (CHTR)

February 26, 2013 11:45 am ET

Executives

Christopher L. Winfrey - Chief Financial Officer and Executive Vice President

Thomas M. Rutledge - Chief Executive Officer, President and Director

Analysts

Benjamin Swinburne - Morgan Stanley, Research Division

Presentation

Benjamin Swinburne - Morgan Stanley, Research Division

All right. Good morning. We on? Okay. We're going to get started. Good morning, everybody. My name is Ben Swinburne, Morgan Stanley's Media Analyst. I'll get through my legal obligation note, important disclosure, including my personal holdings disclosures and Morgan Stanley disclosures all appear in a handout available in registration area and on the Morgan Stanley public website. We're thrilled to have with us this morning from Charter Communications, Chris Winfrey, who's been CFO since November 2010. Prior to that, Chris was over in Europe, at Unitymedia in Germany, and also at Cablecom in Switzerland. Chris, thanks for joining us again today.

Christopher L. Winfrey

A pleasure, as always.

Question-and-Answer Session

Benjamin Swinburne - Morgan Stanley, Research Division

So let's get started. You've reported earnings last week, last Friday. Obviously, the market reacted very well to the results and then the call. Can you give us sort of the main takeaways that you'd like us to get from the earnings outlook from here and sort of what are the big opportunities you guys see in front of you in 2013?

Christopher L. Winfrey

Well, look, I think the Q4 earnings showed that Charter is at in early stage, still, of the turnaround that's being put in place. Some of the positive points where we can see that impact already coming through are our four-fold increase in our customer relationship acquisition in terms of net adds on a year-over-year basis. So that was positive. We also saw an improvement across our video subscriber base, a significant improvement in terms of video net losses. I think the more important point there really is when you take a look at the full year for 2012, we did still have a 155,000 video losses inside of 2012, but it was a big improvement on 2011. But more fundamental is inside that 155,000, only 12,000 of those were expanded basic video losses, which means the more digital, higher quality product customer set really has started to stabilize and we've started to see that come through. So I think those are some of the early signs that we saw. Another big one is we introduced our new pricing and packaging in late June, so it's still relatively early in terms of how that's saturating the market, and the way that we're learning to sell it. But already 30% of our customer base at the end of 2012 was inside that new pricing and packaging, which means that our customer base is increasingly sitting in a very competitive product set which positions us well in the future in terms of lowering the cost to service those customers and reducing the likelihood that they would turn because of the more competitive product that they have in the household. So those are kind of the big operating things that I think we can start to see early stages of the development. On the financial side, we did grow revenue, and it was accelerated at the front end Q4 relative to Q3 as well as on the year-over-year basis. So that was positive despite some of the promotions that we've been putting in place and removing some install fees and one-time charges. So we're pleased with that as well. And then on the EBITDA growth, the fact that we had EBITDA growth at a point in time where we were making some dramatic change inside the business, retooling virtually all of our sales channels, changing the recording lines and the responsibilities, and who's accountable for what inside the business, introducing new product pricing and packaging all at the same time. And I think it was comforting for us to see that we're actually able to grow EBITDA in that amount of change taking place. So we were pleased. It's early on, but we are pleased with the results from Q4 and what it bodes for us going forward.

Benjamin Swinburne - Morgan Stanley, Research Division

One of the things on the call you talked about was the fact that you're still ramping the organization towards this new selling tactics, and you gave a little bit of color around Q1 trends, around selling -- bundled selling and stuff. Can you sort of talk about what -- as we move through Q4 into Q1, what were the changes still going on and how that's playing out here in January?

Christopher L. Winfrey

If you look back to Q3, we effectively gutted a large portion of our sales channels. And we needed to rebuild that from scratch and we're still doing that. So some of what's going on is continued hiring and training and making sure that you have the right set of tactics and customers going out to the market and for the strategies to saturate into our own people in terms of how we're going to market and selling both in the call centers as well as direct sales, so that's all taking place. And we're not at our full stride tom mentioned that on the call as well, we're not at full stride yet, but we're getting better day after day.

Benjamin Swinburne - Morgan Stanley, Research Division

One of the things that always comes up with investors on the stock is sort of the inflection point -- the anticipation and the inflection point on revenue. You did have a good Q4 revenue results already, but I know everyone's looking for more as we move through '13. Can you talk a little bit about the timing as you bring more customers onto the new packaging in home and pricing structure and also the roll-off of promotions from prior periods and how that sort of plays out through '13?

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