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Cable Operators

Rutledge Sees Upside in Charter’s Existing Markets

3/05/2012 12:01 AM Eastern

Tom Rutledge, the new CEO at Charter Communications, is taking a decidedly simple approach to growing his mid-market MSO’s footprint.

Instead of going on an acquisition spree, Rutledge is going after the customers that Charter doesn’t have in its existing markets.

Rutledge officially became Charter’s CEO on Feb. 13, after almost 10 years as the chief operations executive at Cablevision Systems.

While only on the job for two weeks — he claimed he was still learning how the elevator works at company headquarters — Rutledge said he believes Charter’s main potential lies in the 12 million homes it passes.

With about 4.1 million basic customers, St. Louisbased Charter has the lowest video penetration among the publicly traded MSOs at 35% of passed homes.

“Charter can be a very successful company at its current size,” Rutledge said last week during the company’s fourth-quarter earnings call. “The thing that is great about Charter is that it has 12 million passings. It’s got a huge runway in terms of opportunity and it can be a much larger company without any kind of change in potential marketplace.”

Rutledge praised Charter’s high-speed data service, calling it best in class inside its service area, and said the company can build on that product superiority to grow its other segments.

Under previous CEO Mike Lovett, Charter had been beefing up customer service and experimenting with pricing packages and product offerings.

Rutledge praised those moves — which trimmed service calls and truck rolls by about 7% in the fourth quarter — and vowed to build on that momentum. Early efforts, he said, will likely focus on improving the video product.

“At a fundamental level, I think our video product in some households isn’t as competitive as it ought to be,” Rutledge said. “Our job is to make it more competitive and superior to our competitors as quickly as possible.”

“Charter is not Cablevision and it’s a different time and place for me with the issues in front of Charter,” Rutledge added. “But inherently, the physical asset, the cable system that passes 12 million homes at Charter, is a highly capable network and we can design products on that network that are superior to our competitors. It is true that it is less clustered, which requires different kinds of marketing strategies and tactics, but those tactics are available to us. At some level the cable systems are similar.

“Obviously, Charter went through some unique circumstances that gave it a marketplace disadvantage,” Rutledge continued. “But those issues are behind us. Now we have a green-field marketplace opportunity. And when you think about how many unsold passing we have, there is a big opportunity.”

Charter has been a pioneer in selling high-speed Internet and phone service to satellite video customers in its footprint: it ended 2011 with about 785,000 non-video subscribers.

Those efforts will continue, with a goal of making those homes video customers as well.

In the fourth quarter, Charter reduced basic video losses by about 25% compared to the prior year, shedding about 45,000 video customers.

High-speed data additions of 67,700 were more than double the prior year and phone customers grew by 27,000.

For the period, revenue rose 2.6% to $1.8 billion and cash flow was flat at $686 million.

September