Bloomberg News

DirecTV Profit Rises 16% on Customer Gains in Latin America

February 17, 2012

(Updates with comments from CEO in ninth paragraph.)

Feb. 16 (Bloomberg) -- DirecTV, the largest U.S. satellite- TV provider, reported a 16 percent increase in fourth-quarter profit as customer gains in Latin America climbed to a record.

Net income rose to $718 million, or $1.02 a share, from $618 million, or 74 cents, a year earlier, the El Segundo, California-based company said today. Analysts predicted 92 cents, the average of estimates compiled by Bloomberg. The company also said it plans to start a new $6 billion share- buyback program.

DirecTV gained 590,000 customers in Latin America, topping the record 574,000 achieved in the previous quarter as it added services to challenge pay-TV rivals such as America Movil SAB. U.S. subscriber gains were smaller than projected, which may concern investors as DirecTV battles rising programming costs and cable rivals such as Comcast Corp., said Michael McCormack, an analyst at Nomura Securities International Inc. in New York.

“It’s costing more for DirecTV to acquire customers, and U.S. subscriber gains were weaker than expected,” McCormack said in an interview. “At the same time, Comcast is limiting video customer losses. The dynamic is that cable’s Internet bundling is becoming that much more important as the way people watch TV develops.”

DirecTV gained a net 125,000 U.S. customers, fewer than the 162,000 average estimate of 11 analysts surveyed by Bloomberg. Comcast, the largest U.S. cable provider, yesterday reported its smallest quarterly video customer decline since 2007, losing 17,000 customers.

Sales increased 13 percent to $7.46 billion, exceeding projections.

DirecTV fell 2 percent to $45.38 at the close in New York. The shares have gained 6.1 percent this year.

Changing Strategy

DirecTV said programming costs rose because of network fee increases and expenses related to its NFL Sunday Ticket football content. The programming expense will be exacerbated when DirecTV negotiates new contracts with CBS Corp. and Discovery Communications Inc. this year, said McCormack, who has a “reduce” rating on shares.

Chief Executive Officer Michael White said on a conference call the company is “shifting the balance somewhat between the top and bottom line” as a plan to combat rising programming costs. The company plans to be “a bit more disciplined” about attaining new customers and will focus more on subscriber retention, White said.

DirecTV is positioned to “deliver mid-single-digit or better” revenue growth over the next three years, White said. Chief Financial Officer Patrick Doyle said earnings per share will be “well over $4” in 2012. Analysts estimated $4.36.

DirecTV bought back $1.13 billion of its stock in the quarter, part of the previous $6 billion share-repurchase program announced last February.

--Editors: Ville Heiskanen, John Lear

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net


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