Charter Q1 Loss Narrows; To Acquire 1.4 Mln Time Warner Cable Subscribers

(RTTNews) - Cable services provider Charter Communications, Inc. (CHTR) reported Monday a narrower net loss in its first quarter, benefited by higher revenues in most of its segments.

Separately, Charter said it has agreed with cable giant Comcast Corp. (CMCSA, CMCSK) to acquire about 1.4 million existing subscribers of Time Warner Cable, Inc. (TWC) following the proposed Comcast-Time Warner Cable merger, for cash. Also, Comcast and Charter will transfer assets serving approximately 1.6 million existing Time Warner Cable customers and 1.6 million Charter customers.

In addition to these, Comcast will form and spin off a new publicly-traded company, of which Charter's new holding company would acquire an approximate 33 percent stake. Comcast shareholders, including the former Time Warner Cable shareholders, would own the remaining approximately 67 percent of the new firm, which would operate systems serving approximately 2.5 million existing Comcast customers.

The combined Comcast-Time Warner Cable entity will divest systems resulting in a net reduction of about 3.9 million video customers.

The three separate deals are subject to the completion of the proposed Comcast-Time Warner Cable merger.

Charter expects the transactions to significantly enhance its scale and improve both companies' geographic footprint.

Charter said the acquisition of Time Warner Cable subscribers would increase its current residential and commercial video customer base to approximately 5.7 million from current 4.4 million, making the firm the second largest cable operator in the United States.

For Comcast, the divestiture follows through its willingness to reduce its post-merger managed subscriber total to less than 30 percent of total national MVPD subscribers.

The Boards of Directors of both companies have approved the deal, and Time Warner Cable's Board has consented as required under the Comcast-Time Warner Cable merger agreement.

Comcast has reaffirmed that it continues to expect its merger with Time Warner Cable to generate approximately $1.5 billion in operating efficiencies. Comcast intends to use proceeds from these deals to reduce its debt in a leverage-neutral manner and expand its share buyback program. On its first-quarter results, Charter said its net loss was $37 million, compared with last year's net loss of $42 million. Net loss per share was $0.35, versus $0.42 a year ago. The prior year's net loss on a pro forma basis, as if the Bresnan transaction had occurred on January 1, 2012, was $68 million or $0.68 per share.

On average, 16 analysts polled by Thomson Reuters expected the company to report profit per share of $0.12 for the quarter. Analysts' estimates typically exclude special items.

First quarter Adjusted EBITDA of $767 million grew 7.3 percent year-over-year on a pro forma basis. Adjusted EBITDA margin was 34.8 percent, compared to last year's actual margin of 35 percent, and pro forma margin of 34.9 percent. Total revenues rose 14.9 percent to $2.20 billion from $1.92 billion a year ago. Analysts were expecting revenue of $2.18 billion for the quarter. Revenues increased 7.5 percent on a pro forma basis, due to growth in Internet, video and commercial revenues.

In the quarter, all segments posted higher revenues, except Voice segment that was hurt by value-based pricing and revenue allocation from higher bundling.

Looking ahead, Charter said it expects 2014 capital expenditures to be approximately $2.2 billion.

On Friday's trading, Charter shares lost $0.48 or 0.37 percent and settled at $130.01, and Comcast lost $0.40 or 0.78 percent, and settled at $50.97.