HD, DVRs Drive Strong Q4 For DirecTV
Says Liberty Deal Could Close in a “Couple of Weeks”
By Mike Farrell -- Multichannel News, 2/13/2008 7:28:00 AM
With its long-awaited merger with Liberty Media expected in a few weeks, DirecTV Group reported a surprisingly strong fourth quarter, with revenue and cash flow up by 14% each, driven by gains in HDTV and digital video recorder offerings.
On a conference call with analysts to discuss its fourth quarter results, DirecTV CEO Chase Carey said that he expects the Liberty Media deal to close in the next “couple of weeks.” Earlier this month Federal Communications Commission chairman Kevin Martin said he recommended approval for the merger to commissioners who are expected to vote on the deal by Feb. 26, although noting that it could happen sooner.
Revenue for the period rose 14% to $4.4 billion and operating profit before depreciation and amortization (OPBDA, a measure of cash flow) increased 14% to $1 billion. Fueling the growth was a healthy increase in net new subscribers -- 275,000 -- and an even more dramatic reduction in churn, to 1.4% in the period. That was well below churn of 1.57% in the fourth quarter of 2006, the lowest quarterly churn for the company in eight years.
On the conference call, Carey said that the strong results were driven mainly by growth in advanced services. He added that HD and DVR customers made up more than 50% of gross additions in the fourth quarter, up from 33% of gross additions in the same period in 2006.
Carey said that the results show that the strategy to focus on high-quality customers “is truly working well for us.” He added that the satellite TV giant expects to continue the pace; predicting double-digit revenue and cash flow growth for 2008 and continued churn reduction.
In a research report, Sanford Bernstein cable and satellite analyst Craig Moffett said the reduced churn numbers point to the success of DirecTV’s campaign to promote its HDTV offerings.
“Demand for DirecTV's product -- no doubt bolstered by an effective HD marketing campaign -- remains robust, notwithstanding mounting cable and telco competition,” Moffett wrote. He added that the low churn shows “no sign of strain from either involuntary disconnects or the economy.”
The strong results drive up DirecTV shares by more than $1 each in early trading Wednesday to $24.95. The stock settled down a bit in late afternoon trading to $24.74 each (up 86 cents per share).
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