2nd UPDATE: DirecTV 3Q Profit Up, Eases Off On Customer Retention
(Adds executive comments and background throughout.)
By Roger Cheng
DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- DirecTV Group Inc.'s (DTV) third-quarter profit inched
higher, but more subscribers left as the company held back on retaining and
adding customers in an effort to improve its profitability.
The El Segundo, Calif., company has remained surprisingly resilient over the
last several quarters as the cable providers and telecommunications companies
duked it out over rival television, Internet and phone services. Its high-
definition programming and sports packages have kept it relatively protected in
the past, but that advantage is fading as consumers drop premium services. In
most recent quarter, it posted a 13% decline in subscriber addition, while the
subscriber turnover rate was surprisingly high.
It's a result of the company's plan to control costs and weed out customers
that tend to pay for fewer services or seek the biggest discounts. New
customers, meanwhile, have been more apt to sign up for advanced services such
as digital video recorders, and boast higher credit scores.
"This is a trade-off we're willing to make," Chief Financial Officer Patrick
Doyle told analysts during a conference call.
DirecTV reported a third-quarter profit of $366 million, or 37 cents a share,
up from $363 million, or 33 cents a share, a year earlier.
Revenue jumped 9.7% to $5.47 billion.
Analysts surveyed by Thomson Reuters expected earnings of 39 cents on revenue
of $5.42 billion.
Despite the slowdown in new customers, Wall Street was impressed with the
results. DirecTV shares rose 6.6% to $28.60.
"Among all the cable and satellite incumbents, DirecTV has been the sole
provider able to maintain video subscriber growth," said Craig Moffett, an
analyst at Sanford C. Bernstein & Co. LLC.
DirecTV added 136,000 new U.S. subscribers to bring its total base to 18.4
million. The turnover rate rose to 1.72% from 1.64% a year ago, although the
average monthly revenue per subscriber rose 2.1%.
Over the last few quarters, the company had picked off customers from the
cable companies and rival Dish Network Corp. (DISH). But the phone companies
with which DirecTV also partners are starting to show they're a credible threat
with their own television offerings.
While AT&T Inc. (T) and Verizon Communications Inc. (VZ) both sell DirecTV in
certain parts of their territories, both are focusing more on pushing their own
service, U-Verse from AT&T and FiOS from Verizon. Still, DirecTV benefited from
AT&T, which is in the process of switching some of its customers from Dish's
service.
The company's Latin America operations posted a 16% increase in revenue on
strong subscriber growth.
DirecTV is set to combine with various assets from Liberty Media Corp. into a
new publicly-traded company.
DirecTV is still without a permanent chief executive. Interim CEO Larry Hunter
said he hopes to announce a new chief in the "near future," but gave no specific
timeframe.
-By Roger Cheng, Dow Jones Newswires; 212-416-2153; roger.cheng@dowjones.com
(END) Dow Jones Newswires
11-05-091539ET
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