Cord-cutting is real, but it's not having the impact on cable providers you might expect. The number of people subscribing to traditional pay-television has decreased, but those lost subscribers are being more than covered by customers signing up for internet services.
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Charter Communications (NASDAQ: CHTR) has lost pay-television customers. It actually posted a gain of 15,000 video customers in the 2017 fourth quarter, but that was followed by a drop of 112,000 in the first quarter of 2018. Offsetting those losses were the 300,000 internet subscribers Charter added in Q4 2017, and the 225,000 it added in Q1 2018. Revenue rose in both quarters as well, climbing by 3.2% in Q4 and 4.9% in Q1.
Those trends suggest that cable companies have a reasonable plan to weather the storm as they wait to see where the cord-cutting trend will stabilize.
Investors remain somewhat unsure of how to view subscriber numbers. Charter shares actually dipped quite a bit when the company reported Q1 results on April 27, but after an up-and-down May, a recovery set in for June. After closing May at $261.04 a share, Charter's shares finished June at $293.21, a 12% gain, according to data provided by S&P Global Market Intelligence.
Big cable still faces significant market pressure as people continue to cut the cord. But cord-cutters still need broadband connections, and they have few, if any, options in many markets. That, plus the fact that the pace of cord-cutting has been slow, has shown investors to value Charter based on overall customer growth, not just video subscriber numbers.
Charter shares have a potential to remain volatile. Yes, the long-term subscriber and revenue trends are positive, but seeing its core cable business shrink may spook some investors.
This is a developing story because, unlike its major cable rivals Comcast and AT&T, Charter does not own any other major properties (it does have some regional sports networks). That leaves the company vulnerable to subscriber loss, whether it be from cord-cutting or other sources.
These trends give Charter time to either diversify or tighten its bonds with its customers. That's good news for the company, which has righted its ship in the short term but faces an uncertain future.
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