DirecTV posts profit on subscriber growth

Friday, Aug. 5, 2005 | 9:41 a.m.

LOS ANGELES -- DirecTV Group Inc. swung to a profit in the second quarter as subscriber growth drove a sharp rise in revenue for the satellite television broadcaster.

The El Segundo-based company, which is controlled by the global media conglomerate News Corp., earned $162 million, or 12 cents per share, in the three months ended June 30 compared with a loss of $13 million, or 1 cent a share, a year ago. The latest results included a tax credit of $31 million that was offset by $65 million in debt-related charges.

The earnings came in well ahead of the average estimate of 4 cents per share from analysts surveyed by Thomson Financial.

Revenue totaled $3.19 billion, up 21 percent from $2.64 billion a year earlier and beating analysts' consensus target of $3.15 billion. The company attributed the growth to greater per-user revenue, which rose 4.3 percent to average $67.79 last quarter.

In its U.S. division, DirecTV's quarterly net subscriber additions dropped 45 percent to 225,000, but its overall customer base rose 12.5 percent for the year to 14.7 million.

"Overall, we feel good about where we fit competitively and generally about the second quarter," Chase Carey, DirecTV's president and chief executive, said during a conference call with Wall Street analysts.

Carey said high-credit risk subscribers added a year ago helped drive the amount of churn -- the number of new customers who later drop the service -- during the quarter to unacceptable levels.

He said the company was implementing tighter credit policies to help reduce the churn factor, which rose 1.69 percent from 1.49 percent, but warned it would likely remain a problem at least through the third quarter.

DirecTV is on track with plans to add interactive program features to offerings like its Sunday Ticket plan and roll out a home media center designed to allow photos and videos to be shared over a home network. The company plans to launch a new digital video recorder device in early October.

The company is banking on those initiatives to help it lure customers from rivals and cable television providers, who offer broadband Internet access as part of their services.

Carey said the company is weighing its options for expanding its service into wireless format.

"We continue to feel very good about our ability to hold our own competing with the cable bundle," Carey said.

DirecTV's shares rose 42 cents, or 2.73 percent, to $15.83 Thursday on the New York Stock Exchange. ----

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