February 11, 2009

Profits Decrease As Costs Increase At DirecTV

The nation's largest satellite TV provider reported a 5 percent decline in net income for the fourth quarter, despite soaring revenue, due to higher customer acquisition costs and interest expenses.

According to the Associated Press, the DirecTV Group Inc. remains a strong rock in a financial storm thanks to 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, during a conference call to analysts.

Wall Street has anxiously awaited details revealing the economy's impact on the pay TV sector.

"DirecTV looks, at least up to now, positively immune," said Sanford Bernstein analyst Craig Moffett in a research note.

DirecTV's focus on the most creditworthy customers, it's offering of high-definition channels, and exclusive sports programming like NFL Sunday Ticket has protected 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, just a penny shy of analyst predictions. Last year, the company earned $348 million, or 30 cents per share.

Revenue rose by 9 percent to $5.31 billion, thanks to higher subscriptions and prices.

CEO Carey said DirecTV should post solid subscriber growth in 2009.

They will be helped by a marketing partnership with AT&T Inc.; the companies began selling one another's services on Feb. 1.

Carey said in the second quarter, DirecTV will roll out a "whole-home" digital video recording service.

The service will allow 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 added 301,000 net new customers in the fourth quarter, up 9.4 percent, for a total 17.6 million subscribers. The numbers were better than what analysts predicted at 224,000.

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.

Image Courtesy UPI


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