Great (lengthy) article about the messed-up-edness of Paul Allen’s Charter Communications. I think Paul Allen’s greatest skill was his ability to be friends with Bill Gates back in the day.
From a financial perspective, Charter has turned into one of the ugliest U.S. companies still in solvency. Its $19.5 billion in debt dwarfs its market cap of $510 million. Its interest expense alone devours a third of its revenue; rival Comcast Corp., which has four times Charter’s revenues and subscribers, pays about the same. Charter also has a knack for posting nasty quarterly losses, including, earlier this month, red ink of $459 million, or $1.45 a share, for the first quarter, vs. $353 million a year ago. Charter’s quarterly losses per share now exceed its share price, which, at $1.20, has collapsed from a 2001 high of $25. It’s perverse, the realization that each of my $1.20 shares generates a $1.45 loss. It’s a wonder I don’t owe Charter money.
A company spokesman says Charter has ample liquidity and financial resources. But because so much of its cash flow is eaten up by servicing the debt, say analysts, it’s unable to invest in the things necessary to keep customers from flocking to satellite TV and the regional Bell rivals. It’s no coincidence that Verizon Communications chose a Charter cluster in Texas to pilot its foray into video last year. So easy were the pickings that Verizon says it quickly took 25% of the local market. (Charter does not agree with Verizon’s calculations.) And spending-constrained Charter, say analysts, is the cable provider most susceptible to AT&T’s competitive onslaught now that it’s in the process of acquiring Bell South Corp. The company says that its overlap with AT&T-BellSouth in major markets is minimal. Nevertheless, news of that deal sent my Charter shares down to 94 cents apiece — barely enough to get me in the door at a Taco Bell.
Sporting the fiscal soundness of a banana republic, Charter has every reason to erase its debt by declaring bankruptcy, finally wiping out long-suffering holders like yours truly. But it won’t, because Allen, who has billions of his own money plowed into the equity side of the ledger, refuses to cede control to creditors, who would pick through the choicest assets the way they did in the Adelphia Communications Corp. bankruptcy.
Even if you’re not business-minded, it’s an enjoyable read (I think).