November 5, 2013 / 1:55 PM / 7 years ago

UPDATE 2-DirecTV posts strong U.S. subscriber growth versus cable rivals

By Liana B. Baker

Nov 5 (Reuters) - Satellite TV provider DirecTV added more customers in the United States than expected in the third quarter, showing strong subscriber growth in contrast to its cable rivals, which lost video subscribers in the same period.

Analysts said DirecTV may have seen a one-time gain in subscribers from Time Warner Cable, which grappled with a month long blackout over the summer of CBS Corp, the No. 1 broadcast network.

“Against a backdrop of a series of programming blackouts across cableland, most notably between Time Warner Cable and CBS, DirecTV gained share in the U.S.,” said Craig Moffett, an analyst at MoffettNathanson research firm.

DirecTV added 139,000 net subscribers in the United States in the quarter, nearly double the gain of 70,000 that analysts expected, according to research firm StreetAccount.

In contrast, Time Warner Cable said last week that it had lost more than 300,000 video subscribers, while Comcast Corp said it had lost 129,000. Another cable company, Charter Communications Inc, reported a net video subscriber loss of 27,000 on Tuesday.

Time Warner Cable blamed the blackout on CBS for some of its subscriber losses in video.

DirecTV, meanwhile, kept subscribers on board, as churn, or the rate of cancellations, improved to 1.61 percent from 1.74 percent a year earlier.

“DirecTV didn’t give customers any reason to cancel in terms of blackouts or anything like that,” said Brean Capital analyst Todd Mitchell.

ISI analyst Vijay Jayant said the low churn could be attributed to the company’s exclusive National Football League Sunday Ticket package, which lets DirecTV customers watch out-of-market games every Sunday. Promotion for that product ramped up in the third quarter.

In Latin America, DirecTV added 260,000 subscribers, while StreetAccount was looking for 371,900. While its revenue in Latin America increased 5 percent to $1.66 billion, it saw a 12 percent decline in the money it makes off each subscriber. It blamed that decrease on the devaluation of currency in Venezuela and “unfavorable changes” in foreign exchange rates in Brazil and Argentina.

The weaker-than-expected performance in Latin America for the second consecutive quarter was flagged by analysts who have long viewed South America as having the biggest growth prospects for the satellite operator.

Even though DirecTV is the largest U.S. satellite provider with more than 20 million subscribers, investors tend to zero in on the subscriber trends in Latin America, where the company has until now enjoyed rapid growth by tapping into an expanding middle class, particularly in Brazil. It also operates in Colombia, Argentina, Venezuela, Chile and Ecuador.

“Growth expectations for Latin America are likely to come down,” Moffett said.

Net income attributable to DirecTV was $699 million, or $1.28 per share, compared with $565 million, or 90 cents share, a year earlier.

Excluding a fee settlement and other special items, earnings came to $1.13 per share, which beat the analysts’ average estimate by 12 cents, according to Thomson Reuters I/B/E/S.

Revenue rose 6 percent to $7.88 billion, narrowly exceeding analysts’ estimates of $7.84 billion.

DirecTV shares were nearly flat, down 0.1 percent at $64.24 per share.

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