Charter adds its new Covid customers to sub count for Q2 2020

Charter
Moffett Nathanson analyst Craig Moffett said of Charter’s quarter, “They hit it out of the park, even allowing for the inclusion of ‘pledge’ customers with uncertain futures." (Charter)

Charter Communications reported that its second quarter 2020 total residential and small- and medium-business internet customers increased by 850,000, compared to 258,000 during the second quarter of 2019. 

Of the total internet customers, 842,000 were residential internet subscribers added in Q2 2020, versus 221,000 residential internet additions in Q2 2019. SMB internet additions in Q2 totaled 8,000, compared to 37,000 SMB internet additions in Q2 2019.

Charter is approaching its Covid-19-related customers a little differently than its cable peers Comcast and Altice. For example, Comcast counted more than 600,000 high-risk or free internet essentials customers during its Q2. But it didn’t include that number in its quarterly subscriber count and won’t include it until those customers are in paid status.

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RELATED: Comcast adds 323,000 internet customers in Q2 2020

Of Charter’s 842,000 new internet subs, about 254,000 are new customers stemming from promotions and discounts related to Covid-19. 

The FCC’s Keep Americans Connected pledges ended on June 30. In its earnings announcement today, Charter said, “In an effort to assist these Covid-19 impacted customers with overdue balances, Charter waived $76 million of residential, $6 million of SMB and $3 million of mobile receivables, which were recorded as reductions to revenue in the second quarter of 2020.”

Charter executives said that the subscribers it garnered from Covid-19-related offers such as its Remote Education Offer “look just like our regular customer base,” and the company has high expectations that these subs will stay after the pandemic. However, Charter CEO Tom Rutledge did say, “The caveat that we've put out there is obviously, there's a fair amount of stimulus -- a federal economic stimulus -- that's been in the environment, and we don't know what that's going to look like. We don't know how Covid is going to continue to develop.”

In a research note today, Moffett Nathanson analyst Craig Moffett said of Charter’s quarter, “They hit it out of the park, even allowing for the inclusion of ‘pledge’ customers with uncertain futures…These results came in a quarter when GDP contracted at a 32.9% annualized rate. It is hard to find an argument for excluding Charter from the ‘Covid winner’s club.’”

Rural Digital Opportunity Fund

In the second quarter, Charter said it would participate in the upcoming Rural Digital Opportunity Fund (RDOF) auction.

RELATED: Charter throws its hat into RDOF ring, which could be bad news for CenturyLink and Frontier

RDOF will push out up to $20.4 billion in funding over the next 10 years to build and connect gigabit broadband speeds in unserved rural areas.

Moffett writes today, “Even before they announced their plan to participate in the FCC’s upcoming RDOF, Charter had begun to accelerate their so-called ‘edge-outs.’ Charter reported today that, over the past year, their footprint (homes and businesses passed) has grown by 1.1 million, or 2.1%”

Overall, the company reported total second quarter revenue of $11.7 billion, an increase of 3.1% year-over-year, driven by residential revenue growth of 4.1%, mobile revenue growth of 96.1% and SMB revenue growth of 2.0%.

Net income in the quarter totaled $766 million or $3.72 per share, compared to $314 million or $1.41 per share during the same period last year.

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