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For Charter, Kudos From Allen

6/15/2007 8:00 PM Eastern

Charter chairman Paul Allen heaped praise on the cable operator's management team at its annual meeting of shareholders last Tuesday, saying the St. Louis-based company is in its best position in years.

The annual meeting, held as usual at a hotel near Allen's hometown of Seattle, was short and sweet — about 45 minutes with one short question from the floor — typical of past meetings. At last year's annual shareholder's meeting, Allen praised CEO Neil Smit (hired in August 2005) for his moves to shore up Charter's balance sheet through debt refinancing and efforts to launch voice service. This year, he said, those efforts are paying off.

Allen said Smit's intense focus on business fundamentals continues to drive operational momentum, which is translating into shareholder returns, characterized by a nearly threefold increase in Charter's stock price since its last annual meeting in August.

Allen also praised Charter's telephony efforts: Charter now has the service available to about 7 million homes, up from about 3 million at the beginning of 2006 and phone penetration is currently about 8% of total homes passed where service is available.

“We are in a far better position today from an operational and capital structure perspective than we have been in many years,” Allen said. “And I am very excited about this company's future.”

Charter has been on a growth tear in recent quarters, reporting its first quarter of double-digit revenue and cash-flow growth in the fourth quarter of 2006 in four years and matching that increase in the first quarter of 2007. Charter also continued its efforts to refinance debt, increasing liquidity by about $1 billion and reducing interest by about $50 million in a series of deals earlier this year.

“This is a real benefit we have not had for some time,” Allen said.

Smit added that the tele phony rollout and Charter's ability to offer the triple play of voice, video and high-speed data products will continue to drive growth — Charter grew its bundled customer base from 32% of total customers to 40% in one year and increased its triple play bundled customers by five-fold in the same time frame. Charter also is exploring additional revenue opportunities like commercial phone and data service — it grew commercial revenue by 16% in 2006 — and advertising sales, which rose by about 13% in 2006.

That financial growth should also help Charter obtain more favorable terms in restructuring its debt, currently at about $19 billion in the future.

“It's all part of getting our balance sheet and capital structure in shape and aligned with our growth potential,” Smit said.

 

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