Posted by madcityradio.com on February 11, 2009 at 18:18:45:
DirecTV Group 4Q profit falls as customer acquisition, interest costs rise
Tuesday February 10, 4:49 pm ET
By Deborah Yao, AP
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The DirecTV Group Inc., the nation's largest satellite TV provider, on Tuesday reported a 5 percent decline in net income for the fourth quarter, even as revenue soared, because of higher customer acquisition costs and interest expenses.
But -- while many captains of industry are fighting economic headwinds -- DirecTV Group remains a steady ship with higher customer additions, a stable cancellation rate and a 20 percent increase in free cash flow. It was able to raise prices as well.
"We've weathered the economic storm so far but fully aware of the risks," said Chase Carey, DirecTV's chief executive, in a conference call with analysts.
El Segundo, Calif.-based DirecTV is the second pay-TV provider to report for the fourth quarter, and Wall Street has anxiously awaited details revealing the economy's impact on the sector.
"DirecTV looks, at least up to now, positively immune," said Sanford Bernstein analyst Craig Moffett in a research note.
People still aren't canceling subscriptions as a whole. And DirecTV's focus on the most creditworthy customers, its slate of high-definition channels and exclusive sports programming like NFL Sunday Ticket so far has sheltered the company from worse fallout.
Shares of DirecTV, which rose early in the day, fell 28 cents or 1.2 percent to close at $22.30 Tuesday. The S&P 500 slid 4.9 percent and the Dow Jones industrial average 4.6 percent.
In the fourth quarter, DirecTV earned $332 million, or 32 cents per share, a penny shy of the average forecast on a comparable basis by analysts polled by Thomson Reuters. Last year, the company earned $348 million, or 30 cents. DirecTV had 10 percent fewer average shares outstanding the just-concluded quarter after buying back shares.
Revenue rose by 9 percent to $5.31 billion, propelled by higher subscriptions and prices. Analysts were expecting $5.32 billion, on average.
Operating income before depreciation and amortization rose 11 percent to $1.22 billion. Free cash flow rose to $432 million from $361 million.
CEO Carey said DirecTV should post solid subscriber growth in 2009. It will be helped by a marketing partnership with AT&T Inc., in which the companies began selling one another's services on Feb. 1.
Carey said DirecTV will roll out a "whole-home" digital video recording service starting in the second quarter that will enable customers to record programs on a DVR in one room and watch them in other areas of the house on TVs hooked up to linked non-DVR set-top boxes.
DirecTV also plans to "put cable on its heels," Carey said, by partnering with cell phone companies to offer wireless. Other cable companies don't offer viable wireless options.
DirecTV added 301,000 net new customers in the fourth quarter, up 9.4 percent, for a total 17.6 million subscribers. Analysts were expecting 224,000. Meanwhile, customer churn was flat year over year at 1.42 percent.
The average monthly revenue per subscriber was up 3.5 percent to $90.46 due to higher subscription prices and increases in high-definition and DVR fees, which more than offset increased promotions, cuts in upfront equipment fees and lower advertising sales.
Breaking out DirecTV's Latin America operations, revenue rose 15 percent to $572 million. Operating profit nearly doubled to $104 million as costs fell. The average monthly revenue per subscriber decreased 4 percent to $50.09 due to unfavorable exchange rates in Brazil. DirecTV added 160,000 net new customers, down 20 percent from a year earlier.
DirecTV serves 3.88 million subscribers in the region through subsidiaries Sky Brazil and PanAmericana. It also holds a 41 percent stake in Sky Mexico.