Yesterday, Carl Vogel resigned as CEO of Charter Communications
Vogel has a great deal of experience in the communications industry. He has worked for Liberty Media
I don't know what the market is thinking, but in my opinion, the stock fell because a bad situation just seems to be getting worse and worse. Losing a leader is always hard. But trying another turnaround in the midst of a fast-changing and extremely competitive environment is especially difficult. Unlike Comcast
To further complicate matters, satellite-TV providers like EchoStar have been gaining share by signing up customers in rural areas. Unfortunately for Charter, it developed its cable network to serve those very same customers. So Charter is feeling the squeeze from its direct competition as well as from an alternative technology. It also doesn't help that Charter's customer service apparently leaves much to be desired, at least based on anecdotal evidence -- many of my friends have dropped Charter like a bad habit because of poor service.
In the press release, interim President and CEO Robert May said, "There's significant value embedded in Charter that can be -- and will be -- used for future growth and for the benefit of our customers and shareholders." So is Charter a value play or a value trap?
I am not completely convinced, but I am leaning toward "value trap." I admit that Charter's network is a valuable asset. But it's hard to say how valuable it could be, given the huge debt load and the uncertainty about growing revenues. Unhappy customers aren't going to pay more for new services if they aren't happy with their old ones. That spells trouble for Charter as it tries to bundle digital cable, video on demand, broadband, and voice-over-Internet protocol into one package. And without the ability to bundle effectively, Charter will continue to have trouble keeping customers. And it's hard to grow when customers are leaving. Maybe that's why short interest has been so high lately.
Fool contributor David Meier does not own shares in any of the companies mentioned.