DirecTV posts higher profit on subscriber rise
NEW YORK (Reuters) - Satellite television service provider DirecTV Group Inc (DTV.O) posted a higher quarterly profit on Wednesday as it added more subscribers than expected and reduced customer losses to a 10-year low.
DirecTV's shares rose 4 percent on the report, with the company reporting 275,000 net subscriber additions in the United States during the first quarter. Six analysts surveyed by Reuters had forecast subscriber additions at 202,000.
DirecTV, which now has 17 million subscribers in the United States, said monthly customer losses fell to 1.36 percent, which was its lowest first-quarter churn rate in 10 years.
"The story here is about their low customer churn," said Tuna Amobi, an equity analyst at Standard & Poor's.
DirecTV started to focus on winning higher quality customers about 18 months ago by tightening credit controls and targeted marketing at higher income demographics. The strategy initially reduced net customer additions compared with rival Dish Network Corp (DISH.O).
"The pain they went through to clean up their subscriber base seems to be paying off," Amobi said. "They're gaining from high quality consumers that should benefit them in an economic slowdown."
First-quarter net profit rose to $371 million, or 32 cents per share, from $336 million, or 27 cents per share, a year earlier, meeting Wall Street expectations.
Revenue rose 17 percent to $4.59 billion, beating the average analyst forecast of $4.48 billion, according to Reuters Estimates.
Average revenue per subscriber rose to $79.70 from $73.40 due to programming package price rises, increased high-definition and DVR service fees and a gain in the average number of receivers per home.
DirecTV is the largest U.S. satellite TV operator and is controlled by media mogul John Malone's Liberty Media (LINTA.O). It competes directly with Dish Network, as well as cable companies like Comcast Corp (CMCSA.O) and Time Warner Cable Inc (TWC.N).
DirecTV also said it would raise up to $2.5 billion in debt, privately offering up to $1.35 billion in notes due 2016 and $1.0 billion under an existing secured credit facility.
The funds would go toward a dividend payment, which could be used by it to fund an expanded $3 billion stock buyback program.
Wall Street analysts had long predicted that Malone, who took control of DirecTV on February 27, would add debt to the satellite operator's balance sheet as a way to reduce taxes and possibly increase his ownership in the business.
Liberty said it will limit its voting power to its current 47.9 percent.
"It's a rationalization of the balance sheet so he can pay less taxes," said Kaufman Bros analyst odd Mitchell.
DirecTV shares rose $1.04, or 4 percent, to $26.84 in morning New York Stock Exchange trading.
(Editing by Derek Caney and Maureen Bavdek)
