Charter Communications Inc. Defies Cord Cutting -- Adds Video, Internet, and Phone Subscribers

Charter Communications not only beat analyst estimates for earnings in the third quarter, it also reported subscriber numbers which suggest that fears of cord cutting may be overblown.

Analysts had expected the company to report earnings per share of $0.39, while the actual bottom line came in at $0.48. That was driven in part by subscriber growth, which included 131,000 new Internet customers, up from 94,000 in the same period last year, and the surprising addition of 12,000 new video customers, improving on a 9,000 subscriber loss in the same period of 2014.

The company groups its residential cable, Internet, and phone customers under the title "primary service units", and that number grew by 180,000 during the third quarter versus a gain of 114,000 in the prior-year period.

"Our accelerating customer and PSU growth is being driven by our successful efforts to transform Charter into an organization that delivers outstanding products, service and customer value," said CEO Tom Rutledge in the earnings release. "Our operating strategy, which includes continued investment in superior products at attractive price points, with a highly skilled US-based labor force, has accelerated our customer growth, leading to faster EBITDA growth and free cash flow generation."

The CEO also commented that the company was looking forward to applying that strategy across a larger footprint, assuming regulatory approval of its purchase of Time Warner Cable and Bright House Networks.

Charter currently has a nearly $79 billion deal pending to buy TWC and a second smaller transaction on the books to buy privately held Bright House.

Source: Charter

Is cord cutting not happening?The most telling development was that Charter actually added video subscribers. That flies in the face of rampant media speculation that cord cutting will soon undo the cable business as it currently operates.

In addition to Charter's positive cable growth, its would-be acquisition,Time Warner Cable, lost only 7,000 in the most recent quarter, and industry giant Comcast dropped just 48,000.

"It's time to change the narrative about cord cutting," MoffettNathansonanalyst Craig Moffett wrote in a note published in part by Variety. The analyst noted that while pay-television overall is in a slow and steady decline, Comcast, TWC, and Charter are holding their own. "All three are now outperforming pay TV as a whole," he wrote. "Cable is taking share."

Why is the company holding more video users?Charter wrote in its earnings release that it believes that its continued investment in its video business has led to the turnaround:

The company has also added a cloud-based user interface, Spectrum Guide, in some of its markets. The guide "dramatically improves video content search and discovery, and fully enables Charter's on-demand offering," according to the release.

It's a good sign for the mergerAssuming the FCC signs off on the acquisitions, there is no reason to believe it can't minimize subscriber losses across all three companies' customer bases. That may involve continuing to invest in improved technology and clever bundling of products.

It's silly to think that cord cutting won't happen, but it's reasonable to believe that it's not going to collapse Charter's business anytime soon. The company has strongly managed its way around the problem and should be able to continue to do so as it becomes much bigger through the merger.

The article Charter Communications Inc. Defies Cord Cutting -- Adds Video, Internet, and Phone Subscribers originally appeared on Fool.com.

Daniel Kline has no position in any stocks mentioned. He is the opposite of a cord cutter paying for cable and a number of streaming services.The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.