Charter Communications (NASDAQ:CHTR) -- the brainchild of Microsoft (NASDAQ:MSFT) co-founder Paul Allen -- is in something of a bind. The St. Louis-based company remains saddled with $18.5 billion in debt, has a mere $135 million in cash on hand, and is generating unconvincing cash flows to boot. Meanwhile, the nation's third-largest cable company is the subject of an SEC investigation regarding alleged inflationary accounting practices.
The company is undergoing a major restructuring process, cutting 2,300 jobs so far this year. In addition, Charter has dumped some assets to help pay down debt while cutting its capital expenditures by 50% this year. But through the first nine months this year, the company has generated a grand total of $97 million in free cash flow.
Basically, that means that much work remains to be done for the debt-laden company. But what's with all the negativity?
The nation's third-largest cable company saw broadband revenue grow 59% to $145 million in the third quarter, growing its high-speed subscriber base 54% to 1,489,700. With its bundled cable/broadband packages, the company is making some headway into the broadband space, taking some DSL customers away from the likes of SBC Communications (NYSE:SBC).
Revenue-generating units increased 5% to 511,800 units from last year's quarter. But the heavy promotions that have supported this increase -- such as periods of free programming upgrades (I benefited here) -- have also hurt cash flows, as the company continues to battle satellite services such as EchoStar (NASDAQ:DISH) and Hughes Electronics' (NYSE:GMH) DirecTV.
So even though the subscriber numbers were ahead of expectations, revenues missed expectations at $1.21 billion. As a result, the stock fell 5% yesterday.
Really, the bottom line is that Charter Communications is in need of a big fix. But at least it is growing high-speed data revenues, right?
Jeff Hwang can be reached at [email protected].
