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Charter losses spiral as birds peck at subs

Company takes $3.3 bil hit in 3Q

NEW YORK — Troubled cabler Charter Communications swung to a $3.3 billion loss in the third quarter from a small year-ago profit due to a one-time writedown to reflect the diminished value of the business.

St. Louis-based Charter, burdened by an industry high $18.6 billion debt load, said it will require additional funding for debt that comes due next year and that chairman and majority shareholder Paul Allen is not expected to come to the rescue.

Charter, now the fourth-largest cabler, took a $2.43 billion impairment charge from an appraisal that forecasted a lower growth rate and a $765 million charge due to an accounting change.

Revenue rose 8% to $1.248 billion compared to a year earlier, thanks to an increase in the number of high-speed data subscribers and an advertising bump driven by political ads in systems located in swing states.

Most troubling for Charter is that satellite operators, and particularly Rupert Murdoch’s DirecTV, are taking huge bites out of its business. Charter lost 58,600 customers in the third quarter and 164,400 over the past year.

DirecTV has targeted Charter’s markets by adding local channels. Topper Carl Vogel said 750,000 of Charter’s roughly 6 million customers are in areas where satellite has added local channels.

But most of that rollout is complete, indicating to some analysts that the worst may be over.

“The third quarter will be a low-water mark for them,” said Tom Eagan, analyst at Oppenheimer & Co. “After that abates they will have some breathing room.”

But not much. The company spent $424 million to pay the interest on its debt in the third quarter. Its debt is nine times its projected 2004 cash flow, compared to around seven times for industry peer Comcast.

Vogel said the company is evaluating options to reduce debt, including asset sales. He said the company had been approached by private equity players and he had identified certain cable systems that could be sold in the coming months.

Vogel said he’s managing the business to retain high-value customers without breaking the bank on marketing. Of customers that left in the third quarter, about half were taking just basic video service. The company added 108,500 high-margin, high-speed data customers during that period.

Charter shares closed down more than 5% Thursday to $2.53 on the Nasdaq.

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