DirecTV Q1 Earnings Call Coverage

[jcrandall]

Welcome to our quarterly coverage of the DirecTV Earnings Call.

While much of the call discusses financials for investors, they often speak to upcoming plans and progress surrounding plans already in the works.

I hope to hear updates about things like the D11 satellite and more. I'll update this thread live as I listen to the call. Enjoy, and thanks for being a SatelliteGuy!

[jcrandall]

DirecTV Q1 Call Notes:

Chase Carey (CEO): very strong quarter, not much to be critical of.
Advanced products well over half of new install customers (dvr and/or HD)
Advanced Products (HD and/or DVR) now over 7 Million customers.
Strong growth in international business, not just due to financial exchange, business growth strong.

Financial Comments:
US sales up 14%, average revenue per sub up 8% to over $70 / mo.
Advanced service customers sales 50% higher than non, average revenue per sub over $100 / mo.

10 year lowest churn at 1.3%. (lost customers)

Sub Acquisition Costs continue to rise - mostly due to advertising and increased installations of DVR / HD.
Hardware costs down 17% from a year ago despite increase in advanced product sales - key cost reduction.
Also thanks to refurb usage as part of the lease program.

D11 satellite deploys in Q3 to continue adding channels.

Rollout VOD by end of Q2 (Thought this was done, may be removing Beta tag / promote it?)

We have unique strengths to compete against telco bundles and competitors.

[jcrandall]

What driving such good sub growth?
Economy not ad a material impact on our results. Digital Transition not having impact yet, too early.
We have leadership position and momentum in HD, and excute well.

Impact of Sprint / Clearwater merger?
Clearwater hasn't had any meaningful impact on our business yet.

ARPU continued accelleration, due to mix of advanced services or others?
ARPU driven by mix, advanced products, improved quality of subscriber (credit), price increase went well, total mix over past couple quarters.

Competition against FIOS, decision to buy 180 connect?
FIOS & U-Verse. FIOS is spending alot in marketing, competitive where it exists, they have an impact.
Have to question in what they are spending is sustanible.
U-Verse, there is a ways before it is a viable option for most American households, less impact. Not much spending.
180 Connect - get first hand view of our installation. 1.1% of dishes not pointed right, help us improve our quality and give us insight to improve busienss.
Nice financial opportunity value wise, if we do our job well it will be a good investment - opportunity to grow.

Comcast force-converting to all digital, like Chicago, having an impact?
Not going to provide feedback on that - too competitive.

R&D improvements to address MDU market - improve MDU adds?
Good progress in R&D, but not on the execution front. Still not where we should be.
A great technology solution that is a competive advantage for us.
Should start to be benefit in 2008, but still probably longer term than that. (Discussing SWM technology?)

Offering a voice/data bundle like cable?
Get better at being an aide to the customer understanding their options. Especially where we can offer broadband (DSL)
Vary by region / place so takes a lot to put it in place on our systems.

MPEG4 upgrades - what's left?
We are continuing to let customers initiatie. Benefits us to wait.
Part of the west coast (DNS). We're not accellerating it.
HD-DVR last year $400 cost, now in the mid-$200s.
Still a material level to go - but we're on the down side of it.

55% of additions took advanced products - is that seasonal?
General trend upward, probably by 2010 70% take advanced products.
Excess of 50% in Q4, so this is steady growth.

VOD rollout, PPV affect ARPU?
VOD is a longer-term proposition. VOD will grow, but over time.
Content issues being addressed, but it takes time. Takes time for customers to understand it.
Something that will impact ARPU over years, not quarters.

Digital Transition in 2009, 14M OTA households to go pay-tv opportunity?
We'll go after it, it is tough to figure how big. View as a positive opportunity, but not necessarily a huge positive.
We'll target customers in the right segements and get more than our fair share of it.
Credit checks/protections, ssn checks, will protect us.
Not a big factor in our 2008 expectations.

Reductions of box costs in 2009, how much further?
Basic box in the $40s now, limits on how low it can go
Some migration that will add to costs starting in 2nd half of year, new SD-DVR will cost $30 more.
New SD-DVR is UPGRADEABLE to HD (and MPEG4 R-22)

Current Relationship with Tivo?
Continue to have open discussions with them.
Constructive relationship and not doing a whole lot. Focus on things that make sense for us.

Content strategy with MMA on cable networks? Buy a cable network?
Here is value to content distribution, but we want to see real upside in it.
Most are at a premium price, and would take a lot of work to make it pay for itself.


That's it for the Q1 call.

[tigerfan33]

I was hoping D11 would be ready sooner than 3Q. Oh well.

[jcrandall]

I was hoping D11 would be ready sooner than 3Q. Oh well.

Me too, but it seems they are very comfortable with Q3, and I think we're not going to see much new until D11 is up there.

[uncrules]

I see people predicting that D11 will be in it's final position by the end of May. Why they are going to wait that long to light it up remains a mystery to me. D10 was lit up pretty quick after it got to it's final position.

[darrencp22]

This is a quarterly financials call. Analysts keep strick tabs on what you say. If you say q3, it better be q3. Better to overshoot than undershoot, IMHO.

[jcrandall]

I think it may be a situation where there isn't much content they want to add in HD until the fall. If you wait 3 months longer to start the engines (so to speak) than you have 3 more months at the end of the satellite's life. Given that is a long time away, but I don't think they will rush to launch just a few channels. We may see a "big bang" again this fall like we did last October.

[harshness]

I think it may be a situation where there isn't much content they want to add in HD until the fall. If you wait 3 months longer to start the engines (so to speak) than you have 3 more months at the end of the satellite's life. Given that is a long time away, but I don't think they will rush to launch just a few channels. We may see a "big bang" again this fall like we did last October.

There are more than a few HD LIL markets that are waiting not-so-patiently for their channels. Q4 has been a relatively slow period for DIRECTV channel additions in the past couple years.

[jansan]

Thanks for the report