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Cord-Cuting Blowing Cable TV grow, highlighting divergence with Netflix



The speed of pay-TV cable cutting is accelerating, and this week's results for cable and telecom companies underscore how this fundamental shift in consumer behavior adds even more power to technology giants like Netflix Inc. (19659003) cable providers

Charter communication
Inc.,


CHTR -11.68%

the third-largest US pay-TV provider of subscribers, said Friday lost 122,000 video customers in the first quarter, a far worse earnings than Wall Street expects roughly 40,000 subscriber losses. In the same period last year, Charter lost 100,000 customers.

The results triggered a sell-off that lowered charter stocks by 12%, the largest one-day percentage of the stock since 2009. The charter results follow similarly negative subscriber subscription reports this week from its larger ones rivals

Comcast
Corp.


CMCSA -4.56%

and

AT & T
Inc.


T -0.18%

With viewers fleeing traditional television for streaming video services, Netflix has probably been the biggest winner, with subscribers in and out Adding foreign to a clip has surpassed Wall Street expectations.

Other technology companies want to take advantage of changing consumer habits.

Amazon.de
Inc.


AMZN 3.60%

now has more than 100 million subscribers for its prime subscription service, which includes a video offering into which the company has deposited money another with a yesterday's deal streaming NFL games. Google Inc. is expanding its YouTube TV streaming service, an online bundle of cable channels that competes with Hulu Live and Sony PlayStation Vue. And

Facebook
Inc.


FB -0.33%

and

Apple
Inc.


AAPL -1.16%

has each reserved up to $ 1 billion for original programs intended to distract more viewers from traditional television.

Investors are increasingly concerned about services that are taking away market share, Guggenheim Securities Analyst said

Michael Morris,

Some will be persuaded to sell out of slow-growing traditional cable and telecommunications companies and invest in tech stocks.

"Companies like Amazon and Netflix offer breakthrough convenience at incredibly efficient prices," said Morris. "As an investor, you say," I do not know how that ends, but I know it's very difficult to compete if my competitor undercuts me on the price side. The shift in the pay TV industry is strong: from early 2015 to late last year, nine million Americans either cut the cable or decided to buy a traditional cable bundle as they moved into new households, according to MoffettNathanson

Comcast said Wednesday that cable TV customers lost in the fourth quarter due to fiercer competition from cheaper online TV services. AT & T reported declining video revenues as the streaming service DirecTV Now grew the high-quality satellite TV customers could not compensate for deficiencies.

Verizon Communications
Inc.


VZ 3.64%

said that it has lost 22,000 Fios video customers in the quarter, compared with a loss of 13,000 a year earlier, despite the company's emphasis on its traditional TV product has decreased In recent years, they have been trying to focus on digital media.

The results have shaken investors' confidence that the broadband subscriber growth of the large telecommunications companies will offset the decline in cable reductions over time. According to the charter, broadband customer growth declined, which corresponds to a trend in Comcast and AT & T. Charter added 331,000 high-speed Internet subscribers, compared with an increase of 428,000 a year ago.

Investors are also concerned that cable giants do not have the right assets and scale to compete with global technology giants. Comcast is attempting to tackle some of this with a recent bid for European pay-TV operator Sky PLC, but its investors are running out of ideas.

"Cable is currently out of favor, largely due to Comcast's out-of-school activities," wrote Veteran Wall Street analyst

Craig Moffett

in a Friday Research Note.

Growing concerns about cable and telecommunications companies have erased chunks from the market values ​​of Comcast, Charter and AT & T. Charter has lost nearly $ 30 billion in market value since early February, and AT & T has lost nearly $ 50 billion. The market value of Comcast has fallen by nearly $ 50 billion since the end of January.

Charter results weighed on other industrials on Friday.

Dish Network
Corp.


DISH -5.62%

shares fell more than 5% while Comcast lost more than 4% and

Freedom Global


LBTYA -6.09%

PLC fell more than 6%

Meanwhile Netflix has continued to rise. Its already expensive shares have risen more than 62% this year and have increased their market value by $ 52 billion.

Traditional vendors such as AT & T and Dish have aggressively marketed their streaming services, DirecTV Now and Sling TV, but the growth of these offerings has not offset the growing subscriber losses on satellite television. Even with online cable TV services added to the mix, MoffettNathanson estimates that 4.5 million Americans have stopped buying pay-TV packages since 2015.

On a call with analysts on Friday morning, Charter Chief Executive

Tom Rutledge

The company's optimistic vision for its future growth has not changed. Charter managers continue to point to the continued integration of Time Warner Cable and Bright House Networks, both of which were acquired in 2016, as a major source of much of the weaknesses in subscriber outcomes.

Mr. Rutledge said the integration has some "lumpy aspects, as we combine the companies in different ways," he added, "that the integration is actually going pretty well and pretty much as planned."

While subscriber earnings disappointed investors, Charter revenue increased 8% to $ 168 million in the quarter and total revenue increased 5% to $ 10.7 billion. This was driven by broadband revenue growth, cable billing and advertising revenue growth. Earnings per share rose from 57 cents in the previous year to 70 cents. Thomson Reuters analysts said earnings and sales were $ 10.8 billion behind Wall Street estimates of 98 cents a share.

Write to Shalini Ramachandran at shalini.ramachandran@wsj.com


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