Charter sees mobile as its new growth engine

Second quarter earnings results from cable TV companies suggested that mobile is the new video, rapidly becoming a core business for companies like Charter Communications, Comcast, and Altice USA. Speaking at a Goldman Sachs investor conference this week, Charter CEO Tom Rutledge reiterated that the bulk of his company’s mobile growth still lies ahead.

“I think we still have tremendous growth opportunities for the company now and the future, and lies in our ability to provide really inexpensive products that are better than the current product. And the opportunities especially with mobile products going forward are significant,” he said. “Our mobile growth has been accelerating and is expected to continue to accelerate.”

He added that the company’s Spectrum Mobile Wi-Fi service gives Charter the ability to provide a better service to customers through offloading that results in greater traffic management flexibility for the operator as well. “Our Wi Fi networks work well with our mobile networks and make the service actually superior to what an ordinary mobile network provides,” he said.

Charter has only just begun to explore opportunities to bundle broadband and mobile service, and use mobile and Wi-Fi as drivers to create more revenue in existing broadband households. With around 30 million broadband households and about 4 million mobile lines so far, Rutledge sees the ability to generate “a lot of money by attaching those mobile devices to our [broadband] service. That's probably the biggest financial opportunity for us.”

The faster Charter can turn that opportunity into revenue the better, as the company has seen its overall subscriber numbers drop. The mobile service has continued to add customers–1.3 million over the last year–even while broadband growth has stagnated and video subscribers have declined, exacerbated by inflation. But Charter already has credibility as a mobile service provider that will translate to sales even in that downbeat environment, Rutledge said.

“I expect that over time, our mobile growth will look a lot like what we did in the wireline,” he said. “Today, Charter and Comcast are the two biggest wireline phone companies. Most people don't think of it that way, but when we launched Voice over IP we got to 10% penetration or something like that relatively quickly.”

At the same time, Charter is not entirely giving up on video. While the cost of traditional cable TV service and broader market forces continue to drive subscribers away from traditional video services, Rutledge said that Charter’s national video streaming joint venture with Comcast offers it a new path to video monetization. “I don't think it [the company’s video business] is going to fall apart. From a capital intensity perspective, we’re moving into an app-based environment.. I think the platform that we're developing with Comcast in the joint venture gives us an opportunity to monetize video and use our customer relationship to drive that platform deeper into the market, to create an advertiser transaction where we monetize the platform by helping direct-to-consumer media companies.”