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DirecTV Posts Higher Q3 Revenue, Profits

11/08/2006 02:05:00 PM Eastern

El Segundo, Calif. – The DirecTV Group reported third quarter revenues increased 13 percent to $3.67 billion and operating profit before depreciation and amortization more than doubled to $894 million compared with last year’s third quarter.

DirecTV reported that third quarter operating profit quadrupled and net income more than tripled to $628 million and $370 million, respectively, when compared to the same period last year. These financial results include the effect of $325 million of equipment that DirecTV U.S. capitalized during the third quarter under its lease program, which was implemented March 1, the company said.

“Third-quarter results provide an accurate snapshot of the benefits gained from our principal goal to grow DirecTV profitably with a particular focus on higher quality subscriber growth. Highlights for DirecTV U.S. included a 12 percent increase in revenues to $3.40 billion, a more than doubling of operating profit before depreciation and amortization to $823 million and a 31 percent increase in cash flow before interest and taxes to $416 million,” said Chase Carey, president/CEO of the DirecTV Group.


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Carey continued, “As we’ve seen in recent quarters, much of the improved financial results can be attributed to our strategy of targeting higher quality subscribers. Although total gross subscriber additions of 1.0 million in the quarter were down 9 percent compared to the prior year, the more important metric is that we increased the number of higher quality subscribers added in the quarter by 7 percent compared to last year. We’re seeing that higher quality subscribers tend to buy more services — particularly high-definition and digital video recorder services.”

He noted that the improved subscriber base and higher penetration of advanced services are also the main factors driving the average monthly churn rate down from 1.89 percent last year to 1.80 percent in the current period, resulting in 165,000 net subscriber additions in the quarter.

“The increases in both operating profit before depreciation and amortization (including the cost of capitalized set-top receivers under our new lease program) as well as cash flow before interest and taxes are also largely due to the improved customer credit profiles and focus on controlling costs. For example, the total cost to acquire new subscribers was down 8 percent or $56 million in the quarter due to the significant reduction in lower quality subscribers attained as well as an acquisition cost per subscriber, or SAC, that was relatively unchanged from the prior year despite a 72 percent increase in new customers added in the quarter with advanced services.”

Carey concluded said that in coming months DirecTV will launch another 30 markets with standard definition local channels and 12 markets with high definition local channels, bringing our total coverage to approximately 97 percent and 70 percent, respectively, of U.S. TV households.

“With the launch of two additional dedicated HD satellites next year, we are poised to offer the most comprehensive and compelling HD programming to a segment of the population that is expected to experience dramatic growth: homes with HD televisions. In addition, we will continue to introduce exciting services over the coming months including video-on-demand, a gaming lounge and software that enables your television to interact with your personal computer,” he said.

DirecTV U.S. added 165,000 net subscribers in the quarter bringing the total number of its subscribers to 15.68 million as of Sept. 30, an increase of 5 percent over the 14.93 million subscribers during last year’s third quarter.