DirecTV subscriber growth slower than expected

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rayburn45

SatelliteGuys Family
Original poster
Oct 12, 2006
35
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DirecTV Group Inc., the top U.S. satellite TV provider, on Wednesday reported slower-than-expected subscriber growth for the third quarter as it tightened credit checks to focus on higher-value customers.

While net profit tripled, helped by an accounting change, DirecTV added a net 165,000 subscribers in the quarter, far less than the 263,000 it added a year earlier and falling short of the average estimate of 205,000 net new subscribers, according to Cowen & Co.

"The subscriber growth was much weaker than we or consensus expected," said Todd Mitchell, analyst at Kaufman Bros.

DirecTV has said subscriber growth may slow because of its tighter credit checks on new subscribers, which is part of an effort to attract higher-value customers who spend more and are less likely to default.

Kaufman's Mitchell said new satellite subscribers were probably more likely to choose EchoStar Communications Corp. than DirecTV. On Tuesday, EchoStar beat analyst expectations by adding over 295,000 new subscribers in the third quarter.

"EchoStar's gain yesterday was DirecTV's loss," said Mitchell.

Both satellite TV providers are facing increasing competition from cable operators that have rolled out competitively priced bundles of television, high-speed Internet and phone services.

DirecTV, partly controlled by Rupert Murdoch's News Corp., reported a net profit of $370.2 million, or 30 cents per share, compared with a profit of $94.6 million or 7 cents per share, a year earlier.

Profit was boosted by around $325 million after it changed the accounting method for its U.S. set-top boxes under a lease program. The program was introduced on March 1.

Revenue rose 13 percent to $3.67 billion.

Wall St analysts had on average been expecting net profit of $324.3 million, or 26 cents per share, on revenue of $3.63 billion, according to Reuters Estimates.

DirecTV said its average revenue per user in the United States rose to $72.74 in the third quarter from $68.65 a year earlier. It also reduced customer losses, known as churn, to 1.80 percent, down from 1.89 percent a year earlier.

News Corp is currently in discussions with John Malone's Liberty Media Corp. to swap its DirecTV stake with Malone's stake in News Corp.

The talks have renewed investor speculation that it could lead to a merger between DirecTV and EchoStar. The speculation has helped push up DirecTV's stock by around 30 percent since mid-July, and EchoStar shares by around 12 percent.
 

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