NEW YORK (Reuters) - DirecTV Group plans to expand its customer base by offering cheaper TV packages with fewer channels and exploring new ways of bundling Internet access with its satellite TV service, the company’s top executive said on Thursday.
Chief Executive Mike White said at the company’s investor day in New York that the satellite provider will try to grab market share from its cable rivals by offering fewer channels at a lower price in a pilot program next year in a few markets.
“When you come up with fewer channels, you lower the price you get into a new segment,” White said on the sidelines of the conference.
He added that the packages will likely attract customers who are used to paying $30 a month for TV and not the more frugal $15-a-month customers that cable providers are losing.
The plan could be similar to one proposed by Time Warner Cable Inc called ‘TV Essentials.’ [nN18105375].
As costs rise for carrying cable networks, White said the company might offer “a la carte” sports channels in 2011, meaning consumers can buy one channel at a time, like ordering Fox’s The Big Ten Network, instead of an entire sports package.
“We are going to have to look at that in 2011 because sports continues to rise at an unsustainable rate,” White said.
The company is also in talks with wireless wholesalers like Clearwire Corp,Harbinger and other companies about trying to strike a deal to provide broadband access to consumers in bundles, possibly under its own wireless brand.
DirecTV is also discussing with movie studios about how to acquire premium video on demand, only a few weeks after movies are released in theaters. He said the movies would probably be priced between $20 to $30. DirecTV said it would reach an agreement on this premium video by next year.
The leading U.S. satellite television provider expects to add 200,000 net new subscribers in the United States in the current quarter.
The company is on course to have more than 19.1 million subscribers by year-end, closing in on Comcast Corp’s shrinking leadership in the U.S. pay-TV sector. Comcast had 22.9 million video customers at the end of the third quarter.
DirecTV expects to have revenue of about $24 billion this year. Analysts’ average forecast is $23.9 billion, according to Thomson Reuters I/B/E/S.
The company expects to generate about $3 per share in free cash flow this year and post average revenue per user of $90.
The company said on Thursday it expects to generate $30 billion in revenue and $5-plus per share in three years. It expects see operating profit growth in “low-to-mid” single digits in 2011 and mid-to-upper single digits growth in 2012 to 2013.
The company forecast growth for its Latin American unit, saying it will have 8.7 million subscribers by year-end and revenue of $3.5 billion in 2010.
DirecTV’s Chief Financial Officer, Pat Doyle, said the company would continue its aggressive share buyback program, snapping up roughly $100 million in shares per week, or more than $5 billion a year in shares.
Executives said that buying back shares remain the company’s focus for the next two years and that paying a dividend to investors “does not make sense” at the moment.
DirecTV, which competes with DISH Network, has grown in recent years by focusing on high-end pay-TV customers and by offering exclusive sports content such as the NFL Football Sunday Ticket.
Reporting by Yinka Adegoke and Liana B. Baker; editing by John Wallace and Andre Grenon