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Earnings: Charter Narrows Loss With Solid Q3, Remains Debt-Laden

imageIf you didn’t know the backstory and just looked at the solid Q3 numbers from Charter Communications (NSDQ: CHTR), then at the stock price, it would seem like a massive disconnect. But Charter could do everything right, and the burden it is carrying from the debt of Paul Allen’s publicly financed ambitions plus needed capital investment would still weigh it down. The stock closed at $.43 Wednesday; the 52-week high was $1.90 last November and the low point was $.31 last month. The market cap at yesterday’s close was $175 million, far less than it paid in interest expenses this quarter alone and less than its loss for the quarter.

This statement in its just-filed 10-Q says it all: “We have a history of net losses. Further, we expect to continue to report net losses for the foreseeable future. Our net losses are principally attributable to insufficient revenue to cover the combination of operating expenses and interest expenses we incur because of our high amounts of debt, and depreciation expenses resulting from the capital investments we have made and continue to make in our cable properties.”

Now, back to our regularly scheduled earnings … Charter narrowed its net loss to $322 million on revenues of $1.6 billion, compared with a net loss of $408 million on revenues of $1.5 billion in Q307. The 7.8 percent revenue growth was “primarily” driven by high-speed access and telephone increases. Increases in sales of “The Charter Bundle” helped push average revenue per unit (ARPU) up 11 percent to $106.7. The company also improved operating margins.

— Ad sales inched up 4 percent to $80 million from $77 million, once again illustrating the still-incremental role of advertising for cable.

— Telephone is the biggest growth engine, growing 55 percent year over year.

Earnings release | Webcast (9 AM ET) | Slides | Transcript (via Seeking Alpha)