DirecTV Sub Growth Stronger in Q4

Satellite Giant Adds 149K Net New U.S. Subs
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DirecTV reported better than expected net new subscriber growth in the U.S. in Q4, helping to drive domestic revenue and cash flow up by mid-single digits in the period.

DirecTV ended the quarter with 20.35 million customers in the U.S., driven by better than expected gross subscriber additions and lower churn.

"[I]n the U.S., despite operating in a mature, hyper- market with significant cost pressures, we were able to improve our OPBDA margins for the third consecutive year and surpass all of our 2014 plans for subscriber, revenue, OPBDA and cash flow growth, while also making significant headway on improving both the customer service and entertainment experience,” DirecTV CEO Mike White said in a statement. “The focused performance of our two primary segments resulted in a 21% increase in our consolidated free cash flow, topping $3.1 billion for the year - and leaving us with $4.6 billion of cash on the balance sheet at year end."

Overall fourth quarter revenue increased 4% to $8.92 billion, operating profit before depreciation and amortization (OPBDA) and operating profit decreased to $2.00 billion and $1.26 billion, respectively, and diluted earnings per share was unchanged at $1.53 compared to last year's fourth quarter.

In the fourth quarter, DirecTV U.S. revenues increased 5% to $7.14 billion compared with the fourth quarter of 2013 primarily due to strong ARPU growth along with a larger subscriber base. ARPU increased 5.0% to $117.30 mostly due to price increases on programming packages, higher advanced receiver service fees, higher ad sales, increased commercial business revenues and higher set-top box lease fees. These improvements were partially offset by increased promotional offers to existing customers and lower revenues from pay-per-view events. DirecTV U.S. ended the year with 20.35 million subscribers.

DirecTV U.S. net subscriber additions of approximately 149,000 increased compared to the prior year period principally due to higher gross subscriber additions and a four basis point improvement in the average monthly churn rate. The increase in gross additions was mainly associated with a successful new ad campaign, enhanced promotions, wider distribution in the consumer electronics channel and competitor programming disputes. The decrease in the monthly churn rate was primarily due to lower voluntary churn from improved retention practices, as well as more successful winback offers.

"2015 will bring additional challenges to our businesses, but given our solid continued operating momentum and the pending merger with AT&T, I am confident that we will continue to drive value for our shareholders for the foreseeable future,” White continued.

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