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Charter Touts Results of Buyback Program

After converting about 12,000 direct-broadcast satellite customers to its digital-cable service in the first three months of 2001, Charter Communications Inc. last week said it plans to step up its dish buyback programs.

In discussing the MSO's first-quarter financial results with analysts, Charter CEO Jerald Kent said he decided to accelerate the program after visiting Charter's Eastern Region offices. There, he learned that the DBS conversion rate was about 25 percent to 30 percent of homes contacted. Charter's Eastern Region includes about half of the company's operations.

The buyback offer to customers is worth up to $275: a $150 to $200 bounty, plus a $75 installation fee that Charter waives.

"My only comment to them was, 'Why are we wasting our time elsewhere?' " Kent said. "If we're having that kind of success in converting those customers, that's a better conversion-to-contact ratio than we have to homes without any multichannel video."

Charter prices its digital service at about $8 per month less than a similar package of programming offered by DirecTV Inc. But the cable operator's product also includes local channels that DBS providers can't offer.

"The bottom line is we have a better product at a better price-value relationship, and I think we're going to refocus our efforts and really make a concerted push to go after those customers," Kent said.

When it comes to dish-buyback programs, Charter has been one of the more aggressive MSOs, said UBS Warburg cable analyst Thomas Eagan. Its ability to offer independent local TV stations — which provide sports programming in markets like St. Louis and Los Angeles — could prove to be a major advantage over DBS competitors that can't furnish such fare.

"That can be important," Eagan said. "It's a good reason why Comcast [Corp.] has been able to keep a high loyalty rate. Local news and sports can have that effect."

For the quarter, revenue was up 14.4 percent, to $873.8 million, and operating cash flow rose 9.7 percent, to $387.9 million, in line with expectations.

Charter added 274,000 digital subscribers in the period and grew high-speed data customers by 7,000 per week to 343,000.

As a result, Charter said it would revise its previous year-end estimate of 500,000 data customers to somewhere between 550,000 and 600,000 customers.

Subscriber growth also continued to be strong, up 2 percent in the period. Charter ended the first quarter with 6.3 million customers.

Charter's cable-modem sales through retail outlets — particularly CompUSA Inc. — were strong. And the MSO said it could begin to sell digital cable via retail stores in the future.

The operator said it was encouraged by its modem self-installation test, in which customers have completed about 3,000 self-installs with a 10-percent to 15-percent callback rate for a follow-up visit.