Cable operators who blamed second-quarter subscriber losses on seasonality received a rude awakening last week, as their top direct-broadcast satellite competitor — DirecTV Group Inc. — reported its highest second-quarter customer growth ever.
DirecTV added 455,000 net new subscribers in the second quarter, easily beating the analyst consensus estimate of 285,000 customer additions. It was the highest second-quarter subscriber growth ever for DirecTV and just missed the DBS giant’s all-time high — 460,000 additions in the first quarter of this year.
It was also the third straight quarter during which DirecTV added more than 400,000 subscribers.
The additions came during a traditionally weak quarter as college students and snowbirds disconnect service when they return to summer residences. In contrast, the three largest MSOs reported basic-subscriber losses in the second quarter ranging from 21,000 to 96,000 customers.
Comcast Corp. reported the biggest drop (96,000), followed by Cox Communications Inc. (54,000) and Time Warner Cable (21,000). Two smaller operators — Insight Communications Co. and Mediacom Communications Corp. — reported basic-subscriber losses of 15,500 and 42,000, respectively.
During a conference call with analysts, DirecTV USA president Mitch Stern said that subscriber growth was especially strong in markets where the satellite company offers local channels, and managed to criticize the subscriber losses of cable competitors.
“As you saw last week, all the major cable companies reported that they are losing basic-video subscribers,” he said. They all can’t be college students.”
Stern hinted that third-quarter subscriber growth could be strong as well, especially since resale agreements with telcos Verizon Communications Inc. and BellSouth Corp. are expected to gain momentum. Verizon and BellSouth didn’t really start pushing DirecTV service — as a bundle with their voice and high-speed data services — until July and August, he said.
“We expect to see some big numbers,” Stern said on the conference call. “We see it as a completely new stream of adds.”
Still, DirecTV Group CEO Chase Carey said that growth in the second half could slow. He expects cable to ramp up promotional offerings, along the lines of Cablevision Systems Corp.’s $90 monthly package of voice, video and high-speed data.
“I think we still have a much stronger offering, we have the goods to build off of,” he said.
Revenue was up 21% in the period to $2.6 billion. Average monthly revenue per subscriber was $65 in the period, up from $60.90 in 2003. Subscriber acquisition costs, at about $645, were essentially flat.
DirecTV also will gain access to about 10 million customers formerly in Pegasus Communications Corp. territory later this month. DirecTV agreed to buy Pegasus for $875 million in cash last week.