Charter Might Pop Swaps

Strapped for cash and facing more pressing problems — like paring down debt, stemming subscriber losses and dealing with a federal investigation into its accounting practices — Charter Communications Inc. likely won't be on the acquisition path soon.

But the MSO could pad its 6.3 million-subscriber base with systems swaps, CEO Carl Vogel told shareholders last Wednesday.

At Charter's annual meeting in Seattle, the home base of chairman and Microsoft Corp. co-founder Paul Allen, Vogel said reducing debt held priority over acquisitions, adding that the financial markets probably wouldn't support a buying spree.

"Our primary focus is to maximize the operating efficiency of the assets we do own," Vogel said. "As we move through that process and we potentially address asset sales, there may be opportunities to consolidate in certain places. That is not a high priority for us right now. It would likely require additional financing, and frankly, until we deal with the financing challenges in front of us, it's probably a ways away."

But Vogel changed gears slightly — at the suggestion of Allen — stating that systems swaps could be in the cards.

"There may be opportunities for us to swap certain assets," Vogel said. "We've had various discussions with various parties about consolidating certain markets.

"We would certainly look at that where we would potentially swap systems in markets where we don't have critical mass with somebody that does, and maybe pick up some of their assets in places where we have a little bit bigger footprint. We're actively looking at that."

Since he took the helm in October 2001, Vogel has had to find ways to reduce Charter's $19 billion debt load and bolster a shrinking subscriber base, and has needed to deal with a federal investigation into some of its accounting practices — mainly the way it counts subscribers.

While he readily admitted Charter was not out of the woods yet, he pointed to the changes that have been made at the MSO during the past year: restructuring operations into five different divisions, hiring several new operating managers and initiating a private debt offering to refinance about $500 million of existing debt.

"Rest assured that management takes our capital structure seriously," Vogel said. "We're working to reduce our debt levels."

Allen kicked off the meeting by praising Vogel and pointing to the progress the troubled company has made in the past year.

"It's been a tumultuous 12 months since the last annual meeting," Allen said. "I'm happy to say Carl and his bolstered management team have made tremendous strides in addressing the problems of the past and positioning the company to succeed in the months and, years to come."

"There is however, much work still to be done," Allen added. "We are up to the challenge. I have great faith in our Charter team and its leader, Carl Vogel."