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HD Boosts DirecTV Q3 Revenue, Drops Net

El Segundo, Calif. — DirecTV reported it had an 18 percent increase in third-quarter revenue to more than $4.3 billion as operating profit declined 10 percent to $566 million and net income fell 14 percent to $319 million, due to expenses related to expanding its HDTV lineup.

The company’s third-quarter financial report also showed net subscriber additions nearly doubled over third quarter of 2006 to 401,000, while U.S. net subscriber additions climbed 45 percent to 240,000, driven by higher gross additions of 1,032,000 and reduced monthly churn at 1.61 percent. The current subscriber total is now 16.6 million.

“The headline for the third quarter is that significantly greater sales of high-definition and digital video recorder services to higher-quality subscribers are having an extremely positive impact on the key operating metrics that drive DirecTV’s value,” stated Chase Carey, DirecTV president and CEO.

“Over 50 percent of new subscribers in the quarter signed up for HD and/or DVR services compared to only 28 percent a year ago. The increased demand for advanced services was also a critical factor behind the large reduction in DirecTV’s monthly churn rate to 1.61 percent compared to 1.80 percent last year, representing one of the largest improvements in our history,” he added.

Also in the period, the satellite operator said average monthly revenue per subscriber grew 8.3 percent to $78.79. The ARPU increase was said to be DirecTV’s best growth rate in several years and resulted from higher service and equipment fees from new HD and DVR equipment customers.

Carey said the company’s U.S. business saw a strong financial performance as revenues in the quarter were up 14 percent to $3.89 billion, and operating profit before depreciation and amortization increased 11 percent to $916 million.

“Of DirecTV’s total subscriber base, just under 40 percent now have advanced services compared to less than 30 percent a year ago,” Carey said. “The increase in customers adding advanced services, as well as converting to our newer MPEG-4 HD equipment, resulted in higher upgrade and acquisition costs in the quarter compared to the prior year. As we’ve highlighted in the past, customers with advanced services generate significantly greater cash flows and superior financial returns.”

Carey said the company expects “continued strong operating performance in the coming quarters as we continue to enhance the nation’s already-best HD service. We currently offer 74 national HD channels — more than any cable TV provider in the U.S. — and we remain on schedule to offer up to 100 channels around the end of the year.”