El Segundo, Calif. — Strong subscriber growth in the first quarter at DirecTV U.S. helped this segment of The DirecTV Group push up its three month revenue by 22 percent, hitting $2.1 billion, from $1.7 billion in the year-ago period.
U.S. gross owned and operated subscriber additions in the quarter, ended March 31, jumped by 30 percent, reaching 912,000, a company record. Net owned and operated subscriber additions came in at 480,000 for the quarter, up 67 percent.
In related news, DirecTV led off its quarterly earnings conference call by announcing the successful launch of its 7S satellite from an ocean-based launch platform Tuesday. The new spacecraft will eventually reside at the 119-degree orbital slot. DirecTV plans to use the satellite to expand its local TV service to over 100 markets and to add more HDTV services.
Satellite entertainment services provider DirecTV Group said the U.S. subscriber increase was due to more attractive consumer promotions, an improved and more diverse distribution network, an increase in the number of markets in which DirecTV offers local channels and increased advertising.
However, the subscription boost came at a price, with DirecTV U.S. operating profit sliding to $21 million, down from $106 million in the same three months in 2003. The drop was due to increased subscriber acquisition costs, higher costs for the increase in set-top boxes and DVRs purchased by new subscribers and changes in accounting methods.
The U.S. revenue jump also can be attributed to DirecTV’s rise in average monthly revenue per subscriber, which climbed 8 percent, to $63.60 in the first quarter, compared with $59.10 year-on-year. Average monthly churn dipped to 1.4 percent in the three months, down from 1.5 percent in the same quarter a year earlier, reaching its lowest point over the past four years.
The higher average monthly revenue per subscriber was due to a programming package price increase, higher mirroring fees from an increase in the average number of set-top box receivers per customer and an increase in the percentage of customers subscribing to local channels.
The total number of DirecTV owned and operated subscribers reached 11.1 million at the end of March, up from 9.9 million at the end of March 2003, and at an annual growth rate of 14 percent.
U.S. segment sales drove up consolidated DirecTV Group sales in the first quarter by 22 percent, to $2.5 billion, from $2.1 billion year-over-year. The company reported a first quarter net loss of $639 million, compared with a loss of $51 million in the first three months last year. This was due primarily to a non-cash charge of $479 million related to the pending sale of PanAmSat, a non-cash charge of $311 million related to a change in accounting and $63 million for the retirement of a satellite. These declines were partially offset by a pre-tax gain of $387 million related to the sale of about 19 million shares of XM Satellite Radio and a $45 million gain from restructuring of certain contracts.