has announced an 8% rate hike from February 7 onwards owing to
the mounting programming costs and the recent renewal of contract
The disagreement between DIRECTV and TV network major - Viacom
regarding programming fees has led to channel blackouts for the
DIRECTV customers. However, settlement of dispute after
increasing the program rates may hugely impact DIRECTV's margins
going forward. Moreover, the U.S. pay TV market is also getting
saturated which is constantly hurting the company's top-line
Hence, to counter such a situation as well as to boost its
ARPU, DirecTV plans to increase its rates from the beginning of
next year. The company is continuously upgrading its low-end
customers by offering high valued services like Video on Demand,
HD channels and new Genie DVR services. Moreover, the company is
also diversifying its business by offering high-speed Internet
) to rural areas in the U.S., thereby creating other avenues to
drive revenue growth.
Despite maintaining strict credit terms with its customers as
well as removing less popular channels like GolTV and TVB Network
from its channel list have not helped DirecTV to pass on the
rising programming prices to its subscribers.
We are maintaining our long-term Neutral recommendation on
DirecTV. Currently, the stock holds a Zacks #3 Rank, implying a
short-term Hold rating.
El Segundo, California-based DIRECTV Group Inc. is a provider
of satellite delivered digital television, video, and broadband
and also the largest provider of direct-to-home (DTH) digital
television services in the U.S.
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