Charter Expected to File for Bankruptcy by April 1

Hindsight is 20/20, but it looks now as if Paul Allen should have sold Charter Communications some time ago. He considered doing so as long ago as August, 2007.

More recently, the rumors have been bankruptcy, and today it was confirmed that Charter Communications will file for Chapter 11.

Marketwatch notes that poor management caused problems:

Earlier in this decade, Charter was hurt more badly than its cable competitors by satellite broadcasters. The company had many systems that were late in adopting state-of-the art two-way capability, and the satellite companies targeted Charter systems in those areas. It also had a poor customer service reputation that it has had to work hard to overcome.

I would add that Paul Allen's involvement did not help the company. Customers -- and possibly even managers -- assumed that the company could lose money forever. It has, in fact, not made a profit since 1999.

The company has over $20 billion in debt and insufficient cash to make payments. The problems have been visible for some time. In 2007, the article also linked to above noted that the company was, "highly leveraged, with $19.6 billion in long-term debt and $81 million in cash on hand."

Yahoo Finance shows Charter with $22.553 billion in debt, more than Allen can repay by himself (compared to $14.666 billion in assets). Cablevision, which is about 5/6 the size of Charter in terms of subscribers, has $9.140 billion in assets and $14.239 billion in debt. That's a similar debt level.

The key difference? Profitability and customer service.

Look at BroadbandReports' ratings. Cablevision's Optimum Online service gets a B- for customer support and a B+ for the overall rating (value for money). The B- is not good, but it's far superior to Charter. Charter gets a C for tech support and a C for value for money.

Then there's profitability. Full year data is available for 2007, not 2008. In 2007, Cablevision reported net income of $218 million. In 2007, Charter reported a net loss of $1.616 billion.

If Charter cannot solve its profitability issues and customer service problems, this bankruptcy will only be the first of many.