23. Charter Comm. Inc.
Revenues 2012: $ 7.504 billion (€ 5.841 billion)
Charter Communications (CC) is the fourth largest cable network operator in the USA, providing for seven million customers in 40 states. In 2004, 3,5 Billion $ were invested into broadband in order to allow for a more extensive diversification into services that cater for specific genres and target various groups by means of increasing the transmission capacity. At the moment, the company and its cable-network offer digital and interactive television, video-on-demand, pay-per-view services as well as high-speed Internet. On top of its modern broadband technology, Charter communications can offer its customers many a supererogation in the form of Internet-telephone, B2B-video and data transfer. The company maintains cooperations with the ABC Cable Network Group, HBO, Showtime, Cinemax and The Movie Channel as well as local channels and other providers of sports and entertainment. In 2003, Charter Communications released its own broadband cable box through the company’s own Internet TV software company Digeo. Ever since 2005, Charter Communications, GoITV has been part of the cable network. GoITV is the first and only TV station in the USA that transmits complete football games from many Latin American and European countries. Furthermore, the group distributes cable modems, set-top terminals, interactive electronic TV guides and digital music.
Charter Plaza, 12405 Powerscourt Drive,
Ste. 100,St. Louis, Missouri 63131, USA
Branches: Cable services, Video-on-Demand, telecommunications
Legal form: Public Company
Financial year: 01/01 -12/31
Founding year: 1993
Revenues ($ Mio.)
Profit (loss) after taxes ($ Mio.)
Share price (in $, end of year)
Commercial & Others
- Thomas M. Rutledge, President and Chief Executive Officer
- John Bickham, Chief Operating Officer
- Tom Adams, Executive Vice President, Field Operations
- Jim Blackley, Executive Vice President, Engineering and Information Technology
- Don Detampel, Executive Vice President, Technology & President Commercial Services
- Jonathan Hargis, Executive Vice President and Chief Marketing Officer
- Kathleen Mayo, Executive Vice President, Customer Operations
- Scott Weber, Executive Vice President, Customer Operations
- Christopher L. Winfrey, Executive Vice President and Chief Financial Officer
- Kevin Howard, Senior Vice President, Controller and Chief Accounting Officer
- Robert Quicksilver, Executive Vice President & Chief Administrative Officer
- Richard Dykhouse, Senior Vice President and General Counsel
- James M. Heneghan, President, Charter Media
Board of Directors
- Eric L. Zinterhofer, Searchlight Capital Partners
- W. Lance Conn
- Darren Glatt, Apollo Management, L.P.
- Bruce A. Karsh
- John D. Markley, Jr., Bear Creek Capital Management
- Edgar Lee, Oaktree Capital Management
- David Merritt, BC Partners Inc.
- Stan Parker, Apollo Global Management, L.P.
- Craig A. Jacobson, Hansen, Jacobson, Teller, Hoberman, Newman, Warren, Richman, Rush and Kaller L.L.P
- Jeffrey A. Marcus, Cumulus Media
- Thomas Rutledge, Charter Communications
Major Shareholders: Paul Allen (90%).
Charter Communications (CC) began in 1993, a local cable network operator in St. Louis (Missouri), took over Gaylord Entertainment Co. from Nashville (Tennessee) and soon went on to become the tenth largest cable network provider in the USA. In 1998, following CC’s acquisition of the Marcus Cable Company from Dallas (Texas) for 2,77 Billion $, it was in turn taken over by the investment company Vulcan Inc. for 4,5 Billion $, as a result of which CC became the seventh largest US-cable network operator. Microsoft co-founder and – according to US-Magazine Forbes – third richest man in the world, Paul G. Allen (estimated assets: 20 billion $), was the mastermind behind the deal. Due to illness, Allen withdrew from the operative business at Microsoft in 1983 and began investing in several new media companies after selling parts of his Microsoft shares. He also founded the investment company Vulcan Inc. in 1986. When his attempt to take over then ‘narrowband’ market leader AOL had failed in 1993, his sights were firmly set on the cable network in the mid 1990s and the aim of becoming the market leader in the broadband segment. Allen tried to realize his vision of a ‘networking’ world through the acquisition of the two cable network-operator companies. His vision foresaw a world in which every person would own a PC and a broadband connection and dispose of countless interactive means of entertainment and obtaining information.
By ways of his investment company, Allen owns shares of more than 40 technology, media and sports companies and is also involved in culture and charity activities. He holds shares of production companies Clear Blue Sky Productions and DreamWorks SKG as well as the women’s television station Oxygen, which was founded by Oprah Winfrey (among others). On top of that, he owns the NBA basketball team Portland Trail Blazers, the NFL club Seattle Seahawks, ‘The Sporting News’ magazine, a cinema and a Jimi Hendrix rock music museum.
Cable network operator CC’s rise to the top happened in the blink of an eye. In 1999, CC became a listed company, was included in the Nasdaq 100-Index in 2001 and was considered the climber of the year in the technology business. Between 1999 and 2000, the company expanded by taking over several local cable network operators. With the collapse and demise of the new economy, CC’s problems began to take form. The company failed to decrease its enormous debts of 19,5 Billion $ so far.
Although Charter was awarded the ‘Outstanding Corporate Growth Award’ by the Association of Corporate Growth in 2001, it has been struggling to cope with its problems ever since, many of which are home-brewed: Apart from allowances and investments of four Billion $ regarding the modernisation of the cable systems, CC had to pay a total sum of 144 Million $ to suing shareholders because of irregularities in the business reports of 1999 and 2000. In the period of 2002 to 2003, the company suffered from severe losses as a result of high write-offs. In order to counter that development, chairman Paul Allen offered a credit of 300 Million $ coming out of his private fortune. In addition, Charter’s image had been profoundly damaged when investigations were made into irregularities in business reports as a result of which the balances had to be modified for the years of 2002 and 2003. Subsequently, Allen replaced his leadership team, one of whom was Carl A. Vogel the Chief Executive from 2001-2004 in whose tenure Charter lost approximately 800.000 customers.
It was the support of a handful of large banks that saved the company from irrevocable bankruptcy. Yet even a credit of over 8 Billion $ in early 2004 and restructuring measures turned out not to be sufficient enough to lead Charter back into safe water in years to come. In 2006, the share lost 90% of its worth over the course of 11 months. Thus, the company boosted its consolidation efforts. The company hoped for positive developments as a result of a new marketing concept and the emphasis of ‘high return investments’, that is, expenses with a high return of cost within a relatively short period of time. Yet, the company only registered growth in high-speed Internet connections due to its high access speeds and data transmission rates as well as Internet-telephone. The enormous investments in the improvement of the cable network on the other hand would only generate profit in the long run.
Another cloud drew itself over the sky in the form of a conflict with large US-Hollywood studios in 2004/2005, which were unwilling to abandon winnings related to the licensing of film rights to the network operators: Hence, the first wave of court cases submitted by the Motion Picture Association of America (MPAA) against the users of film Internet exchanges rolled in by 2004. Yet, the courts ruled that mere facts of suspicion would not translate to the necessity of Internet providers to release the data of their customers and Charter was not made responsible for eventual violations of copyright by their user base. However, the RIAA soon began to bring an action against person or persons unknown. Since 2005, a provider is obliged to issue user data on demand by the courts in singular cases.
On the 27th of March, Charter filed for bankruptcy as defined in chapter 11 (under creditor protection) in New York. The company failed in refinancing 21,7 Billion $ of debt from existing businesses. A restructuring plan was submitted on the 7th of May, which in turn was approved by the court on the 17th of November. 8 Billion $ of debt were converted into shares. That meant the end of the bankruptcy process and Charter once again became capable of action. Yet, a staggering 13 Billion $ of debt have to be handled ever since. Paul Allen’s share after the restructuring amounted to a mere 35 percent. In late 2009, the company had vanished from the economy headlines for five years and delivered business reports sporting only a meagre increase in growth.
The aftermath can be felt to this day: Head of marketing Ted Schrempp left the company in February 2001. Head of finance Eloise Schmitz and head of technology Marwan Fawaz left the company in March 2003, receiving compensation payments of 4,1 and 5,5 Billion $ respectively. The 29th of March 2011 saw the end of Allen’s influential position at Charter. The board of directors reduced his 35 percent share to 2 percent and the released shares were scattered. Two further changes were made in the supervisory board. William McGrath and Christopher Temple (both appointed by Paul Allen) were replaced by Edgar Lee from investor Oaktree Capital and Stan Parker of Apollo Global Management.
Paul Allen, former Microsoft-business partner of Bill Gates, who owns 90% of Charter Communications and a fortune of 18 Billion $ is one of the richest men in the world. According to the Forbes Magazine from March 2007, he holds position number 19 in the list of the richest people in the world. By the end of the 1990s, the Microsoft co-founder acquired Charter for 4,5 Billion $. As Chairman of the board of directors, he holds the highest position in the company. He enjoyed the support of W. Lance Conn, member of the board of directors and acting shareholder, who also acts as vice president for Vulcan Inc. Investment Management. Allen founded Vulcan, an investment and project management company, in order to process investments amounting to several Billion $.
Neil Smith has been the CEO since 2005 and plays another important role in the management of Charter. The high debts in the two-digit and Billion range caused quite a few headaches for the management and they face the harsh challenge of diminishing these losses. The management of Charter finds itself in the adverse situation to face an increasing competition, while supporting the operation of its services through focused investments and at the same time enduring the fact that old debts decrease the company’s degree of flexibility when it comes to taking action. Allen and his leadership team, which includes Robert P. May, interim president and CEO, Jeffrey T. Fisher, Executive Vice President and CFO as well as Jonathan L. Dolgen attempted to open up new possibilities of navigating the company through new credits. The pressure on the leadership team is immense and does not fail to take its toll in regards to the composition of the team itself. In 2007 for example, Kevin D. Howard, former vice president and CAO had to leave the company.
At the moment, the management is primarily concerned to convert the investments into strategies that result in growing revenues. The consolidation course will continue with the outspoken goal to tie up with successful times such as the year of 2001, when Charter still enjoyed the cheers and praise from the business world and became part of the Nasdaq-100 Index.
Charter Communications and its information and service provisions is active in the whole of the telecommunication market. By the end of 2010, the cable and TV system operator supplied 12,8 Million subscribers in 40 US-American states, making it the fourth largest cable network operator after Comcast, Time Warner Cable and Cox Communications.
Charter’s telecommunication division includes cable and satellite services, especially analogue and digital video services as well as data services. Furthermore, CC acts as Internet and online service provider as well as provider of landline connections. About 5 million customers subscribed to the complete package ‘Triple Play’ in 2010, which includes TV cable, telephone and broadband Internet.
The distribution divisions on the US-American market are divided into three parts, the West Division catering for the core markets in South California, North Central CA/NV, North-West US and Texas, the Central Division in the states of Wisconsin, Minnesota/Nebraska, Michigan and the central states, the third division is the whole of the East Coast with the states of Alabama, Georgia, Louisiana, New England, South Carolina and Tennessee. According to statistics, Charter sports 5,4 million customers in its core market of analogue video services within these distribution territories. At the moment, CC focuses its efforts first and foremost on expanding new service provisions, a measure that seems - in relation to the company losses at least – rather overdue. A system upgrade that will cost the company 3.5 Billion $ is supposed to generate new takings in the field of broadband services in the near future. Other new product divisions are the modern HDTV-Technology and digital telephone services (CC supplied over half a Million telephone customers). Charter maintains partnerships with Digeo and OpenTV in order to provide interactive TV-services.
In 2009, the television and video services generated up to 61% of the total revenues. In 2010, the segment remained the strongest company sector with revenues of 3,698 Billion $ (2009: 3,468 Billion $).
In order to address the increasing demand of the users, Charter offers a varied range of program modes such as Pay Per View, Video in Demand, subscription system and specialised offers such as digital video recording and high definition television. Not unlike its competitors, Charters reacts to the increasing competition for customers. The company offers TV-package services that can contain regional programs, home-shopping, religious channels or weather forecasting. Depending on the package, it includes between 9 and 30 channels, while extended television services are comprised of any number between 20 and 60 channels. Between 3 and 45 TV channels are also being provided in digital form. In order to cater for more extravagant customer demands, the digital range offers premium channels (such as HBO Family and HBO Comedy), sports programs, ethnic channels or films. Premium channels are tailored towards specific groups and singular interests with sports programs, films or family topics.
Charter includes an increasing number of high definition programs in HD-quality, one more stone to weigh down the debt. Yet, the HD-packages are more attractive to customers who acquire larger and larger televisions on which the standard quality television looks less attractive.
So far, the data transmission took place primarily via Internet-VOIP. The telephone division generated 2% in 2006, a comparatively small profit. In 2007, Charter sought to extend its availability in 6,8 million households and make itself more attractive by means of new services. According to provisional numbers, the revenue of 343 Million $ meant more than double the previous amount (2006: 135 Million $). Between 2008 and 2010, the revenue increased, despite a market that was shaken by the emergence of the mobile phone from 555 to 823 Million $.
During its consolidation efforts, the Internet market caused the most headaches in the top floor offices and the company will struggle to turn its investments into profits. Charter managed to generate 19% of its revenue in 2006 with Internet services (1,05 Billion $). However, in 2007, the amount increased to 1,23 and even 1,6 Billion $ in 2010. Charter faces fierce competition and struggles to keep up with the market’s swift developments.
First and foremost, Charter markets advertising times for its satellite channels, the clients of which include MTV, CNN and ESPN. In 2006, the advertising business contributed 6% of the company’s total revenue, making use of cross-channel advertising as well. In 2009, the revenue could be increased to 346 Million $ and up to 494 Million % in 2010.
Ranking - Top 50 (2012)
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- Google Inc.
- The Walt Disney Company
- News Corp. Ltd.
- Time Warner Inc.
- Viacom Inc./CBS Corp.
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- Bertelsmann SE & Co. KGaA
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- Cox Enterprises Inc.
- Dish Network Corporation
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- Reed Elsevier PLC
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- Fuji Media Holdings, Inc.
- Bloomberg L.P.
- Charter Comm. Inc.
- Advance Publications
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- The Nielsen Company
- Gannett Co. Inc.
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- France Télévisions S.A.
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- The Hearst Corporation