Accounts worries hit US cable firm

Accounting worries have battered Charter's shares

Charter Communications has become the second US cable company to have its accounting practices investigated.

The firm, the US's fourth-biggest cable TV operator, admitted that a grand jury had demanded documentation on its book-keeping and customers, amid concerns over the way it accounts for some of its costs.

Charter calmly assured investors that it was cooperating fully with the investigation, but its shares nonetheless dropped by 8% during the first few minutes of trading.

Last month, executives at Adelphia, the country's number-six cable firm, were arrested and charged with accounting fraud at the firm, which filed for bankruptcy at the end of June.

Lawsuit threat

This latest investigation, conducted by the District Attorney for the Eastern District of Missouri, came as no surprise to Charter.

Last month, the firm was hit by a class-action lawsuit alleging that its statements contained omissions and untruths, which had resulted in an inflated share price.

Microsoft's founding billionaire Paul Allen is behind Charter

In fact, the firm's shares have been poor performers, falling from a flotation price of some $21 at the beginning of 2000 to about $2.50 today.

According to Charter, the grand jury case is on the same issue as the class action, and concerns among other issues the provisions the company makes for uncollected customer accounts, something of constant concern for Charter's shareholders.

Investors are certainly twitchy: on 18 July, when a Merrill Lynch analyst expressed concerns about potentially misleading accounting practices, Charter's stock fell more than 13%.

Debts pile up

Charter, which is controlled by Microsoft co-founder Paul Allen, started out providing cable TV, but has now shifted towards the theoretically more promising broadband market.

Earlier this month, Mr Allen, who owns 56% of Charter, said he might buy out other shareholders and take the company private.

Mr Allen said he would consider "restructuring transactions" to lower Charter's $17.5bn debt mountain - measures that may include a debt-to-equity exchange or a straight buy-out.