Charter Communications SWOT & PESTLE Analysis

Strength

1. Leader in telephone and internet services: With approximately 28.1 million telephone customers, Charter is a leader in telephone services. Charter has a dedicated customer relationship management department to achieve a high level of customer satisfaction and good brand equity and has also built a reliable distribution network that can reach majority of its potential market. They are the second largest cable operator in the United States and the leading company in broadband communication services providing video, internet and voice services. They have recently launched Spectrum as an all-rounder service on mobile platform. They also sell video and online advertising inventory to local and regional advertising customers and fiber delivered communications and information technology solutions to larger customers. They own and operate regional and local sports, and news channels. Charter boasts of a high capacity, two-way telecommunications network which encompasses 50 million households and many SMEs across the United States. They also offer wireless internet services which include Wi-Fi services. About 250 million devices are expected to be wirelessly connected through their network. The wireless connections are focused more on homes.

2. Supreme customer service and satisfaction: Charter’s core strategy is to use their network to deliver high quality products and services at competitive prices. They have combined this with simple and easy to understand pricing and packaging. This makes their customer base grow further, whilst they sell their core services like mobile internet and video and voice services to each customer. They execute this strategy by managing their operations throughout in a consumer friendly and cost-efficient manner. This includes insourcing of almost all their customer care and field operations workforces, which leads to an unmatched quality of service delivery. The insourced operating model significantly increases the cost of field operations and customer care but the higher quality of the insourced labor service significantly reduces the volume of service transactions per customer. As these keep reducing, Charter is able to provide customers rates of services at a very competitive front and is able to provide greater value to customers than its competitors. This combination of providing high quality service and competitive pricing is what keeps them at the top of their game. This combination also helps reduce transactions performed per customer relationship and yields higher customer satisfaction. This leads to lowering of the churn rate and reduces costs of acquiring newer customers. They have also modified their customer services to allow increased interaction with customers including on the website and chat forums and facilities of self-installation which is hassle free. Charter offers a lot of flexibility in terms of selecting the services customers want to avail. This kind of freedom not only leads to customer retention but also leads to new customer attraction.

3. Wide geographic footprint: Through its years of network exchanges, as well as bolt-on and large-sized acquisitions, Charter boasts of capturing formidable positions in several of the most valuable U.S. television and broadband markets, including Alabama/Georgia, California, and New England. Charter has presence in over 41 states of the United States. They have 28.1 million customer relationships including internet and telephone customer connections. They witness over 50.1 million estimate passing. These figures are not just indicative of Charter’s presence in the markets of United States but also speak about its broad expanse and reach. The reach is also very definitively expressed in these figures. The company has made a great effort in the integration of Bright House networks and Time Warner cable into one Charter Communications. The former was purchased for roughly $10.5 billion in cash and stock, and gave Charter increased coverage in the Midwest and several regions in Florida. The Time Warner deal provides Charter with a dominant foothold in New York City and transforms it into California’s leading cable provider. These acquisitions and subsequent integrations allow Charter to have a strong hold over its competitive territory.

4. Strong comeback after Integration: After the recent acquisitions of Bright House networks and Time warner cable about two years back, Charter has exercised subsequent integration efforts to unite all into one Charter Communications. The integration was difficult but despite all changes that they have made to their people, core processes and operations in the last one and a half years, they have been able to avoid customer disruption and they have ensured that their core business continues to grow quickly and there is no subsequent downslide. Their revenues from the previous year have grown from $40,023 million to $41,581 million which is approximately 4% growth they witnessed in fiscal 2017. Their EBITDA grew about 6% from $14.464 million to $15,301 million in the year 2017. Their customer base has also significantly increased by 4% to become 28.1 million in the year 2017. All these growth parameters indicate that despite the integration based difficulties, Charter Communications has been growing for the past two years consistently and there is no significant slowing of growth as well. This showcases their planning and muscle invested in seamless integration and transitioning.

Weakness

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Opportunity

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Threat

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Political

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Economic

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Social

1. The hierarchy of society: The class distribution among the population is of paramount importance: Charter Communications would be unable to promote a premium product to the general public if the majority of the population was a lower class; rather, they would have to rely on very niche marketing. In the U.S, the upper classes, consisting of 3% of the population, are indifferent to the service they use. The middle class is almost 40% of the population of US earning at about $76000. Then there is the working class consists of about 30% of the population earning about $45000 per year. The lower class almost consists of 27% of the population earning about $9000 to $18000 per year. The primary customers for Charter lie in the middle class and working class, because Spectrum has different packages defined according to the needs of the consumers.

2. Rising data needs and changing consumer preferences: As we advance towards the 5G era, there are massive investments and changes to be made in order to satisfy the never-ending hunger for data of the customers. With more data heavy applications, the number of consumers purchasing unlimited data plans has increased from 25% in 2017 to 37% in 2018, according to the Global Mobile Consumer Survey of 2018 by Deloitte. The daily lives of consumers are so intricately connected with their mobiles therefore reasoning out their insatiable hunger for data. The market leader Comcast along with competitors in the same segment like Verizon etc., are offering similar plans for lower prices bundled with other offers, thereby decreasing the average revenue per user. Charter is not far behind in this ongoing turf war, as its Spectrum unleashes a completely new category providing the same services along with digital TV services. According to a 2018 digital media survey of Deloitte, 55% of US households have paid video streaming subscriptions and the percentage of households with pay TV services feel from 75% to 63%. This clearly indicates the demand for digitization and rising data needs. Such demands if not completed by a single company can be fulfilled by partnerships between two. Such changes in the payTV sector and the digital TV services sector can lead to major merger and acquisitions in the ISP industry, due to changing dynamics and increasing competitive pressure. This may lead to integrated technology and better development towards the 5G era.

Technological

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Legal

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Environmental

Flitting weather conditions: may significantly impact the ability of Charter Communications to manage the transportation of both the resources and the finished product. This would affect the delivery dates of the final product in the case of, say, an unexpected monsoon. An unexpected monsoon may also lead to poor service of the digitalized connections. The recent catastrophes like the hurricane Harvey damaging big parts of Houston and Texas, main converging areas for Spectrum, led to infrastructural loss for Charter Communications. Moreover, the climatic catastrophes like the volcanic disruption led to loss of network fibers and cable lines leading to huge capital expenditure in fixing the damage. The same has been reflected as Charter’s cost of capital has significantly rose in the year 2018 compared to 2017 as is reflected in the annual report. A separate section explains the loss coverage of optic fiber networks and cables, and towers; in details highlighting to what extent the damage has been done categorizing it into reversible and irreversible damage. Most of it is reversible and hence not costing them much but the irreversible damage such as burnt connections of optic fiber networks and cables can only be repaired if the whole line system is replaced. This led to the phenomenal increase in costs.