El Segundo, Calif.. — The DirecTV Group today reported fourth-quarter revenues increased 16 percent to $4.18 billion and operating profit before depreciation and amortization more than doubled to $915 million compared to last year’s fourth quarter.
DirecTV reported fourth quarter 2006 operating profit and net income also more than doubled to $595 million and $356 million, respectively, when compared to the same period last year. These financial results include the effect of $408 million of equipment that DirecTV U.S. capitalized during the fourth quarter under its lease program, which was introduced March 1, 2006.
Chase Carey, president/CEO of DirecTV, said, “Fourth quarter results point to the continuing progress and operating strength at DirecTV U.S. highlighted by strong revenue and cash flow growth. These results were driven by improved operating metrics including subscriber growth, churn, ARPU and subscriber acquisition costs, a reflection of the competitive strength of our business.”
He added, “Gross subscriber additions of over 1 million in the quarter were 6 higher than last year but more importantly, we attained an even greater growth rate for higher-quality subscribers compared to last year. The emphasis on adding higher quality subscribers who purchase significantly more advanced products and services helped drive our monthly churn rate from 1.7 percent last year to 1.57 percent in the current quarter, the biggest improvement in over 3 years. The higher gross additions combined with the lower churn rate drove a 38 percent increase in net subscriber additions to 275,000 in the quarter.”
Carey continued, “DirecTV U.S. financial results were also strong in the quarter highlighted by a 12 percent increase in revenues to $3.8 billion fueled by a 6.8 percent ARPU increase—the highest growth rate in over two years—and continued strong subscriber growth. Operating profit before depreciation and amortization nearly doubled to $876 million primarily due to the capitalization of set-top boxes under the new lease program implemented in March 2006, the gross profit generated from the higher revenues and to a smaller degree, the reduction in subscriber acquisition costs to $626.”
He noted that also impacting the quarterly results were higher upgrade and retention costs primarily due to the increased number of customers upgrading to high definition and digital video recorder services, as well as converting to new MPEG-4 equipment.
“These high-value subscribers generate the highest ARPU, lowest churn and greatest cash flow for DIRECTV over the long term,” Carey said.
DirecTV U.S. reported sales of $13.7 billion for the year ended Dec. 31, 2006 up from the previous year’s $12.2 billion. Operating profit for the year tripled to $2.35 billion up from $802 million and net subscriber additions were up 820,000 in 2006 down from 1.19 million the previous year. However average monthly subscriber churn was down to 1.6 percent from 1.7 percent in 2005.
For the full year DirecTV had overall revenues of $14.76 billion up by 12 percent versus 2005 due to growth in the U.S. and Latin America. Operating profit for the year before depreciation and amortization more than doubled to $3.39 billion and operating profit more than tripled to $2.36 billion driven by U.S. operations.
Net income for the company in 2006 was $1.42 billion up from $336 million in the previous year.
Carey said that for 2007, “Perhaps the most important initiative will be the launch of up to 100 national HD channels in the second half of this year following the successful launch of a new satellite. With this added capacity, we expect to offer significantly more HD channels than most of our competitors, providing DirecTV with a huge advantage in this rapidly growing marketplace.”
