[opendtv] News: Subscriber growth lifts DirecTV

  • From: Craig Birkmaier <craig@xxxxxxxxx>
  • To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
  • Date: Tue, 3 May 2005 08:14:39 -0400


May 03, 2005

Subscriber growth lifts DirecTV

By Georg Szalai
NEW YORK -- News Corp.-controlled satellite TV giant DirecTV Group 
Inc. posted improved first-quarter financials Monday that exceeded 
Wall Street estimates across the board. The results were driven by 
record net subscriber additions that were higher than in any quarter 
of what was a record 2004 despite increasing cable competition.

However, management warned that seasonal factors and tighter credit 
policies will slow future quarterly subscriber gains by about 10%.

Shares of DirecTV closed up 5.3% at $14.87.

The company reported a first-quarter loss of $41 million, compared 
with a year-ago loss of $639 million, which included various one-time 

Revenue rose 26% to $3.2 billion as net U.S. subscriber additions 
came in at a first-quarter record of 505,000, bringing the firm's 
total user base to 14.4 million as of March 31.

A rise in monthly average revenue per user from $63.57 to $65.78 -- 
in part because of increased prices -- also boosted revenue as did 
the consolidation of rural subscribers that DirecTV acquired in the 
third quarter.

Analysts said DirecTV's latest financials also showed improvement in 
two areas that have been concerns for investors: average monthly user 
churn and subscriber acquisition costs/retention marketing. Investors 
have feared that it is becoming increasingly expensive for satellite 
TV providers to grow their user base profitably.

DirecTV's monthly churn in the latest quarter rose from 1.4% last 
year to 1.5% but was lower than analysts had expected.

Retention and upgrade costs rose from $176.6 million a year ago to 
$254.5 million in the first quarter, and average SAC rose from $644 
to $656. However, the latest figures were better than the $334.2 
million and $669, respectively, that DirecTV had posted for the 
fourth quarter.

"While results were encouraging given first signs of more balanced 
growth ... it remains early to determine if trends are sustainable 
amid increased cable competition," UBS analyst Aryeh Bourkoff said.

In a conference call, DirecTV president and CEO Chase Carey lauded 
his company's performance, saying "the strong demand for DirecTV U.S. 
service throughout the country continued in the first quarter." He 
particularly mentioned the success of DirecTV Para Todos, which 
targets Spanish-language homes and added more than 120,000 net new 
users in the latest quarter to reach more than 700,000 overall.

Carey said the coming quarters will "really be critical" for DirecTV 
in terms of making its service even more cutting-edge with new 
interactive TV features, such as local weather information, an 
interactive digital video recorder coming in the summer and 
enhancements to the NFL Sunday Ticket package.

Carey said the current second quarter tends to be more challenging 
for subscriber growth and churn, and a March price increase will add 
to that. Also, stricter new credit policies will reduce gross 
subscriber gains by about 10% going forward, he predicted.
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