DirecTV Adds 129,000 Subs In Q2

Satellite Leader Reports Lowest Period Churn In Four Years

By Linda Moss -- Multichannel News, 8/7/2008 12:39:00 PM

Just days after Dish Network reported a customer loss, dominant satellite provider DirecTV Thursday posted a gain of 129,000 subscribers in the second quarter, which was basically flat versus a year ago but beat some projections on the Street.

DirecTV said its slight subscriber growth, 129,000 new net subscribers versus 128,000 in the year-ago quarter, was driven by the company’s lowest second-quarter monthly churn rate in four years: 1.49%.

“The reduction in churn was principally due to a continued focus on attaining higher quality subscribers and an increase in the number of subscribers with advanced services,” the company said.

DirecTV has seen much success with its aggressively marketed slate of HDTV offerings. It is adding 30 more national HD networks next week, which will bring its HD roster to 130 channels. DirecTV has also launched an on-demand service.

DirecTV’s results were in stark contrast to its satellite rival Dish Network, which on Monday reported that for the first time in the company’s history it had lost customers, 25,000 in the second quarter.

DirecTV’s gross subscriber additions in the second quarter slipped down to 894,000 from 900,000 in the second quarter last year.

“The decline in gross additions to 894,000 was in part due to the end of the AT&T distribution agreement in the former BellSouth territories on April 1, 2008,” DirecTV said in a press release.

AT&T opted to continue just reselling Dish Network, not DirecTV, satellite service until the end of this year.

At the end of the year, the telco will evaluate whether it will partner with any satellite service, Dish Network or DirecTV, in 2009. 

“Over the past year, DirecTV’s high-end positioning and strong HD offerings have led to it being the clear consensus bet within the pay TV sector,” Sanford Bernstein analyst Craig Moffett wrote in a report Thursday. “And, judging by second-quarter results, with good reason. But with sentiment so uniformly positive, the question is whether ‘good’ is…well, good enough.” 
 
DirecTV ended the quarter with 17.16 million subscribers, a 5% increase from the 16.32 million subscribers a year ago.

Dish Network’s tough second quarter prompted a story in The Wall Street Journal earlier in the week indicating that CEO Charlie Ergen was looking to take another run at merging Dish with DirecTV. His attempt at such a merger in 2001 was thwarted by federal regulators.

Neither Dish Network nor DirecTV would comment on the report.

The DirecTV Group Thursday reported that second-quarter revenue increased 16% to $4.81 billion, operating profit before depreciation and amortization increased 20% to $1.36 billion and operating profit increased 8% to $801 million compared to last year's second quarter.

 DirecTV Group also said that that second quarter net income of $455 million increased 2% and earnings per share increased 8% to 40 cents compared with the same period last year.

“DirecTV's strong second quarter results again point to the successful execution of our strategy to offer the nation's best television experience to higher quality subscribers,” DirecTV Group CEO Chase Carey said in a statement. “In particular, our industry-leading content, HD, DVR and interactive services are driving strong top-line growth, higher operating margins and most importantly, substantial cash flow growth."

DirecTV U.S. revenue increased 13% to $4.2 billion driven by subscriber growth as well as a 7.0% increase in ARPU, average revenue per unit.

“Much of our success in adding new subscribers, reducing churn and increasing household revenue can be attributed to the significant increase in subscribers with HD and/or DVR services over the past year,” Carey said.