Vogel Says Charter Is a 'Well Positioned' Operation

Cable World,  April 7, 2003  

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Byline: STACI D. KRAMER

If Charter Communications can't pull itself together on the operating side, none of the financial restructuring scenarios being floated will matter. Last week, CEO Carl Vogel laid out a picture of a company doing just that - radically revising its internal structure, trimming payroll by 1,300 with more to come and turning over much of its top management.

The company is "well positioned from an operating standpoint," Vogel said, downplaying the loss of 357,000 analog video subscribers. Charter had 6,578,800 on Dec. 31, 2002, down from 6,936,200 the previous year.

Vogel promised to stem the loss with improvements in service and image but said Charter's real focus will be on increasing its broadband reach through its high-speed-data service. As Vogel explained, "This is our highest profit margin product with the lowest cost of capital to deploy."

Vogel made his case in a 15-minute conference call on April 1, but he would not entertain questions. The call came after a midnight release of preliminary, unaudited results for the fourth quarter and for 2002, and the restatement of financials for the past two years. Charter also said it was seeking a 15-day extension for the audited filing with the SEC. This is all against the backdrop of a continuing federal grand jury investigation into Charter's accounting and operating policies.

"The company's conference call left a lot of questions unanswered," says Aryeh Bourkoff of UBS Warburg, "specifically how the company's progressing on its operational side given the new hires."

Those new hires include COO Maggie Bellville and the team she is assembling, which so far includes several fellow Cox alumni. Her latest hire, Kip Simonson, moves from Cox's Orange County system to VP of sales and marketing for Charter. He replaces Diane Schneiderjohn, who Vogel hired as SVP of marketing and programming. Sue Ann Hamilton was hired recently as SVP of programming.

Part of Charter's internal restructuring involved changing from a division/region/system structure to five divisions organized by state. Three of the divisions are headed by new hires; Charter continues to search for an executive to head the West division. According to several sources familiar with the situation, despite Vogel's assertions that the company continues to attract top talent, Charter is running into resistance from veterans unwilling to sign up.

"Maggie, I think, was a great hire," says Bourkoff.

One gauge of her impact will be the analog basic numbers.

"Everything really depends on their turning around the erosion on the installed base of basic customers," says Matthew Harrigan of Janco Partners. "They have to halt that."

Harrigan says the financials show those were very uneconomic customers. But, he says, "If you continue to lose customers now you're cutting into muscle and bone."

"The basic analog cable business is by far the majority of Charter's cash flow," Bourkoff adds. "It is critical for establishing the foundation from which to grow, including servicing its debt. The company has to maintain its core business."

THE NEXT QUESTION:

*With News Corp. on the verge of owning DirecTV, is Charter's rural operation more vulnerable?

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