Instead of a back-to-basics policy, Charter Communications ( CHTR) is backing off of basics.

The cable system operator, whose stock has been hit by debt-load worries and the abrupt departure of its CEO last year, told Wall Street on Monday that it was literally writing off growth in its business of basic cable, or low-priced, no-frills traditional video service.

Instead, the company will focus its efforts on marketing its higher-margin, advanced services to current and new customers: digitally delivered video, which enables expanded channel capacity and video-on-demand, and high-speed Internet connections.

The newly articulated approach reflects an industrywide trend among cable TV operators, which are in the midst of their fourth-quarter financial reporting season: Facing high penetration and competition from competing home satellite dish services from companies including EchoStar Communications ( DISH), they're finding little growth in the traditional business of delivering a basic channel lineup.

Investors seemed ambivalent about the company's outlook. On Monday afternoon, Charter's shares were trading at $11.22, down 3 cents. The company's shares, which have a 52-week high of $24.45, fell in late September after longtime CEO Jerry Kent unexpectedly announced his departure, citing differences with Charter's chairman and biggest shareholder, Microsoft ( MSFT) billionaire Paul Allen.

For the fourth quarter ended Dec. 31, Charter reported $1.11 billion in revenue, up 13.6% from pro forma revenue of $974 million in the fourth quarter of 2000, edging past the mean analyst forecast of $1.08 billion reported by Thomson Financial/First Call.

Operating cash flow, also known as earnings before interest, taxes, depreciation and amortization -- a common yardstick used by cable operators and other media companies -- grew 11% to $502.6 million. That number excludes $17.6 million in one-time charges the company took to quickly transfer customers from the Excite@Home high-speed Internet service to an in-house operation. The company met expectations for the number of new digital-video customers added in the fourth quarter, and exceeded expectations for additions of high-speed Internet customers.

Looking forward, the company says it expects revenue growth between 12% and 14% in 2002, and operating cash flow growth ranging from 11% to 13%. In 2002, says Charter, it expects to add 550,000 to 600,000 new customers for each of its high-speed Internet and digital video products.

Stop the Revolving Door

But new CEO Carl Vogel, a veteran of the cable and satellite businesses, told analysts Monday that in the effort to show Wall Street basic cable growth he termed unsustainable, Charter had relied too much on deep discounting of basic cable offers, leading to excessive call volume and high churn, or customer turnover. "The best practice is to promptly disconnect marginal customers," said Vogel.

The company said that among its general and administrative expenses in the fourth quarter was a $10 million bad-debt write-off. The company said it expected to remove 120,000 marginal basic customers in the first quarter of the year, a number equivalent to 1.7% of Charter's basic customers at the end of 2001.

Addressing concerns about Charter's debt load, along with generalized Enron-related market anxiety, Chief Financial Officer Kent Kalkwarf felt compelled to tell analysts that the $16.3 billion in long-term debt on the company's balance sheet is "the entire amount" for which Charter is responsible.

The company's borrowing capacity, said Kalkwarf, is sufficient to fund operations until late 2003 or early 2004, by which time the company expects to be generating free cash flow. Charter intends to achieve investment-grade debt level by the end of 2004, he said.

Continuing the parade of cable system financial releases, Cox Communications ( COX) is scheduled to report Tuesday, and Cablevision Systems ( CVC) is scheduled to report fourth-quarter financials on Thursday.