El Segundo, Calif. — Continued strong subscriber and average monthly revenue per subscriber growth pushed up fourth quarter revenue at the U.S. business of DirecTV by 15 percent, climbing to $3.4 billion from a year-ago $3 billion.
Operating profit in the company’s U.S. business moved into the black in fourth quarter, ended Dec. 31, reaching $260 million, compared with an operating loss of $65 million in the same period the prior year. The black quarter was due to the revenue increase combined with higher operating margins resulting primarily from lower subscriber acquisition costs due to a decline in gross subscriber additions and lower acquisition costs per subscriber.
DirecTV watched U.S. gross subscriber additions fall 13 percent in the fourth quarter, to 965,000, down from a year-earlier 1.1 million. This drop reflects primarily a more stringent credit policy implemented during the second quarter of 2005, said the direct broadcast satellite provider.
Average monthly revenue per subscriber in the United States climbed 5 percent, to $75.53 in the fourth quarter, up from a year-on-year $71.92. This was primarily due to programming package price increases and higher mirroring fees from an increase in the average number of set-top receivers per customer.
Average monthly churn in the three months increased to 1.7 percent from 1.6 percent, principally due to higher involuntary churn from customers with lower credit scores attained in the more competitive marketplace of 2004 and early 2005, as well as 10,000 disconnected subscribers resulting from Hurricane Katrina. Fourth quarter churn was down from 1.9 percent in the third quarter.
“Fourth-quarter results for DirecTV U.S. reflect our strategy to improve the quality of our subscriber base and reduce customer churn, while at the same time drive significant revenue and earnings growth,” said Chase Carey, president/CEO. “Subscriber growth in the quarter — although below expectations — was consistent with our initiatives to improve the quality of new subscribers and drive lower churn.”
In the past 12 months, the cumulative number of U.S. DirecTV subscribers increased 9 percent to 15.1 million from 13.9 million.
For the 12 months, U.S. DirecTV revenue soared 25 percent, hitting $12.2 billion from $9.8 billion. Operating profit for the year skyrocketed to $802 million from a year-on-year $22 million.
Average monthly revenue per U.S. subscriber increased 4 percent to $69.61, from $66.95 in 2004.
Gross subscriber additions in the 12 months decreased to 4.17 million from 4.2 million. Average monthly churn rose to 1.7 percent from 1.59 percent, for the period.
Consolidated fourth quarter revenue at DirecTV rose 7 percent to $3.6 billion from $3.4 billion the previous year, due primarily to strong U.S. subscriber growth and higher average monthly revenue per subscriber.
Consolidated net income for the quarter also moved into the black, hitting $121 million, from a net loss of $289 million in the same three months the prior year. The improvement was due to the increased operating profit and higher interest income from larger average cash balances, partially offset by higher income tax expense.
Full-year consolidated revenue increased 16 percent to $13.2 billion, from $11.4 billion in 2004. Net income came in at $336 million, compared with a loss of $1.9 billion the previous year. The 2004 net loss was affected by two charges — $724 million related to discontinued operations and $311 million resulting from a change in accounting methods.
