DBS is a competitively difficult medium for multichannel video services because the satellite providers can’t offer companion bundled high-speed and voice services the way rival telco and cable operators can. But you wouldn’t guess that DBS is handicapped based on DirecTV’s Q2 07 earnings report. Revenues, cash flow and net customer gains were relatively decent during the quarter, although profits dropped on higher operating expenses.
U.S. revenues rose 6% year-over-year to $3.7 billion, while cash flow grew 9% to $1.1 billion. Profits were $448 million, or 37 cents per share, down from $459 million, or 36 cents per share, a year ago.
Subscriber gains continued at seasonally normal levels, something of a surprise given that cable operators have recently reported unexpected reversals, or surprise slow-downs, in basic customer gains. During the quarter, DirecTV added 128,000 net new customers, up 2.4% over Q2 06 net subcriber gains.
Acquisition costs, always a touchy variable for DBS providers, were up 7% year-over-year, while revenue per customer also grew by 7% as more customers purchased “advanced” services such as HD packages or set-tops with DVR capability. DirecTV is clearly banking on HD and DVR to fuel revenue growth momentum.
During the earnings call, company executives said that around 40% of the total 16.3 million subscriber base are purchasing HD or DVR add-ons and that the number of customers upgrading to HD DVRs is up more than four-fold year-over-year. Moreover, DirecTV is gearing up to launch 100 nationally available HD channels, which the DBS provider thinks will help it “leap-frog” over the cable competition.
CEO Chase Carey sounded optimistic about the company’s competitive position. “There’s no question that it’s an increasingly competitive marketplace but we feel really good about where we’re positioned,” he said. It helps that DirecTV has partnerships with the incumbent telcos, including Verizon and AT&T (through the former BellSouth territories).
About 25% of the new customers that DirecTV garnered during the quarter came from these telcos, Carey said.
Carey also put the kibosh on the notion that a slow-down in the construction of new homes has hurt DirecTV’s business, an idea that some analysts have been floating. The “slow-down in home starts is not something you can track to…it’s for us a dynamic on the margin,” meaning that DirecTV didn’t notice any particular impact by the cooling in housing growth.
Cynthia Brumfield at 2:12 PM|Comments(0)
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