Earnings: Fox Hot, Charter Shot

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Charter Communications suffered another terrible quarter, taking a $3.2 billion charge against assets and bleeding more subscribers. For the third quarter ended Sept. 30, the cable operator lost 158,000 basic subscribers, as revenues increased a moderate 8% to $1.2 billion. Cash flow rose a mere 1.5% to $471 million, and the cable operator's cash-flow margin dropped from 40% to 37.7%. Charter cut its own valuation of its systems by $2.4 billion, an acknowledgement of what investors figured out long ago: Charter's cash-flow problems are long-term. The remaining $765 million charge stems from an accounting change.

In other earnings reports last week, News Corp.'s U.S. operations had a mixed quarter. Its Fox cable networks were the stars, boosting operating income by a huge 35% to $196 million for the three months ended September, the first quarter of News Corp.'s 2005 fiscal year. Accounting for the sale of the Los Angeles Dodgers, the networks increased revenues 16%. News Corp. reports its financial results according to Australian accounting principles. That will change next quarter, however, with the company's official move of its “domicile” this month to the United States.

News Corp.'s cable-sector growth was driven by ad-rate bumps at Fox News Channel, now cable's most popular cable network, and FX, with hits like Nip/Tuck. It also got a boost from affiliate revenue growth at its regional sports nets.

On the other hand, the Fox broadcast network was in the red but did shrink its loss from $90 million for the same period last year to $9 million. Higher ad prices and lower program costs offset a 12% decline in ratings. Fox's TV stations increased income just slightly.

Also last week, Time Warner disclosed that it reserved $500 million in anticipation of a settlement of a Securities and Exchange Commission investigation of its past accounting practices. That overshadowed a moderately good quarter during which the company's cable systems and cable networks posted solid gains.

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