Tighter Credit, Competition Pressure DirecTV

Satellite Giant Loses 28K in U.S., Sheds 119K in Latin America
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As it nears the conclusion of its planned $48.5 billion merger with AT&T, satellite giant DirecTV said it shed 28,000 net subscribers in the U.S. in the third quarter, primarily because of tighter credit policies and tougher competition.

AT&T announced its intention to acquire DirecTV in May. The deal is expected to close early next year.

DirecTV’s loss is similar to its satellite TV rival, Dish Network, which shed about 12,000 pay TV customers in the period. In addition to the domestic subscriber losses, DirecTV Latin America, the company’s main growth engine of late, also saw a decline in pay TV customers, shedding 119,000 net subscribers in the period.

In a research note, MoffettNathanson principal and senior analyst Craig Moffett said the subscriber losses pint to the importance of broadband – without its own broadband service, DirecTV is often paired with less desirable DSL service from telcos.

“Growth is hitting a wall,” Moffett wrote.

In the meantime, financial metrics remain relatively healthy. Overall, revenue rose 6% to $8.4 billion and operating profit before depreciation and amortization (OPBDA) increased 5% to $2.04 billion. In the U.S., revenue rose 5% to $6.5 billion and OPBDA was up 11% to $1.6 billion.  

 “Our third quarter financial results continue to demonstrate the strong execution of our operations,” said DirecTV CEO Mike White in a statement. “In the U.S., although competition for subscribers continues to be intense, revenue growth was very solid while operating profit before depreciation and amortization margin expanded year-over-year for the fifth consecutive quarter, highlighting our commitment to profitably grow our businesses through disciplined subscriber acquisitions and expense management, as well as smart pricing.” White added, “In Latin America, due to challenging macroeconomic and foreign exchange headwinds, we continue to focus on local currency performance which has allowed us to profitably grow our businesses, as well as begin generating positive cash flow in the region - one of our primary goals for the year.”

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