Charter 2006 Annual Report Download - page 6

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4
CHARTER COMMUNICATIONS, INC. LETTER TO STOCKHOLDERS
Operational Execution and Financial Discipline
Increased focus on driving revenue across all product categories coupled with
operating improvements throughout the Company resulted in 10% revenue
growth and 5% adjusted EBITDA growth for 2006 on a pro forma basis. Our
quarterly revenue and adjusted EBITDA growth rates improved during each
quarter of 2006; and in the fourth quarter we reported simultaneous double-
digit revenue and adjusted EBITDA growth for the first time in four years.
Moreover, our efforts to balance pricing and volume growth have led to six
consecutive quarters of revenue generating unit (RGU) growth. We consider
these results tangible evidence of the momentum Charter is building.
Managing a business for sustainable growth requires disciplined execution
and investment in initiatives that generate the highest projected returns. In
2006, we made thoughtful capital and operating investments across many
areas of our business. Capital expenditures were approximately $1.1 billion,
75% of which supported revenue-producing activities, including customer
premise equipment, line extensions, and scalable infrastructure. We expect
2007 capital expenditures to be approximately $1.2 billion and, like last year,
about 75% of that amount will support activities that produce revenue.
The Power of the Bundle Drives Growth
Bundling, which offers customers a combination of two or more
Charter services for one value-based price, is the engine of Charter’s
growth. We aggressively marketed two- and three-service bundles in
2006 and, as a result, grew our bundled customer base from 32% to nearly
40% of total customer relationships year over year. In addition, we increased
by five times the number of customers subscribing to our triple-play bundle
of cable television, high-speed Internet, and telephone services, bringing
triple-play customers up to 6% of our total customer base at the end of 2006.
Bundling drives improvements across many fronts of our business,
including increased customer satisfaction and retention, improved
RGU growth, higher revenue per customer, and improved margins.
While we are still in the relatively early stages of our telephone
deployment, we are seeing an increase in the percentage of bundled
customers in markets where we have achieved double-digit telephone
penetration. We are encouraged by these early results and will continue
to aggressively market our bundled service offerings, promoting the
quality, convenience, and compelling value Charter offers its customers.
Managing a business for
sustainable growth requires
disciplined execution and
investment in initiatives
that generate the highest
projected returns.
Revenues
(in billions)
2004 2005 2006
$5.0
$4.8
$5.5
$4.0