The largest U.S. satellite TV operator
) recently announced solid subscriber addition of nearly 100,000
in the final quarter of fiscal 2012.
Despite generating highest subscriber growth for fiscal 2012,
DIRECTV's U.S. segment reported 20% fall in subscriber growth in
the fourth quarter of 2012 as compared with last year's quarter
but increased 49% as compared with the fourth quarter of 2011,
hence taking its tally to a total 20.081 million subscribers, up
1% on an annualized basis.
Despite generating highest subscriber growth for the fourth
quarter of fiscal 2012, DIRECTV's U.S. segment reported 20% fall
in subscriber growth in the reported quarter as compared with the
same quarter the year before. However, it increased 49% as
compared with the fourth quarter of 2011, hence taking its tally
to a total 20.081 million subscribers, up 1% on an annualized
We believe that such massive improvement in subscriber growth
is mainly attributable to settlement of service renewal fees with
Viacom, and will restore faith of the customers. Moreover, launch
of new DVR devices and other value added services may have
prompted demand for DIRECTV.
During fiscal 2012, DIRECTV added 196,000 customers as
compared with 661900 customers in fiscal 2011.
) coupled with slowdown in promotional activities due to
increasing cost is seen to have reduced customer growth for the
U.S. segment in 2012. Moreover, a saturated U.S. market and stiff
competition from other pay-TV and online video streaming
) and Hulu has continuously hurt subscriber growth for the
company going forward.
However, DIRECTV's Latin American segment has continuously
posted record subscriber growth mainly driven by lower
penetration of the pay-TV market in the region.
Consequently, the rise in renewal fees by nearly 20% may jack
up programming expenses of DIRECTV, thereby affecting margins
going forward. In order to mitigate such expenses the company has
decided to hike rates by 8% from February 7 onwards.
We believe that such increase in rates from next month may
impact customer growth for DIRECTV in the first quarter of fiscal
We are maintaining our long-term Neutral recommendation on
DIRECTV. Currently, the stock holds a Zacks Rank #3, implying a
short-term Hold rating.
DIRECTV (DTV): Free Stock Analysis Report
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VIACOM INC-B (VIAB): Free Stock Analysis
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