Top satcaster flying high

DirecTV profit up 107% as new subs soar

Leading U.S. satellite television provider DirecTV continues to make big gains at cable’s expense. The satcaster on Wednesday beat the Street’s earnings forecasts by a big margin, reporting second-quarter operating profit before depreciation and amortization up 107% over last year to $325 million while picking up 181,000 net customers to bring its total audience to 11.56 million homes.

Some 40% of new subscribers in the quarter, prexy Roxanne Austin said, were previously digital cable homes, marking a victory for DirecTV’s campaign to be a “complete cable replacement service.” Austin also noted that a hefty 83% of its second-quarter additions came from the 63 U.S. markets where DirecTV now offers local broadcast channels.

DirecTV’s good fortune, partly on the back of strenuous cost-cutting and new revenues from high definition and sports packages, helped parent Hughes Electronics Corp. swing from a $155 million loss a year ago, to a group net profit of $21.6 million. Company, a tracking stock of General Motors, is in process of merging into News Corp., a transaction it hopes will be completed and signed off on by regulators by the end of this year.

Revenues at DirecTV rose 16% over the same period last year to $1.8 billion.

Austin said DirecTV’s robust second-quarter perf demonstrates the success of recent strategic changes, namely the pursuit of “high quality” customers who have pushed up the operator’s average revenue per subscriber to an industry high of around $61 per month. Company said monthly churn — subscribers who leave and are replaced by new subscribers — which is considered a weak point by some analysts, is being held to 1.5% per month.

Revenue at the DBS unit increased 16% over the second quarter of 2002 to $1.8 billion.

Fortunately for soon-to-be new owner News Corp., company is bullish about the rest of the year and has increased its cash flow, subscriber and revenue forecasts for the balance of the year. It’s targeting operating profits before depreciation and amortization of around $1 billion off total revenues of $7.5 billion, with 900,000 net news subscribers for the year.

Subscriber acquisition costs were up slightly for the quarter from $545 to $595, which the company attributed to additional multibox homes and increased advertising.

Austin says company will continue to seek revenue streams, particularly from selling its high definition packages and integrated set-top box/digital video recording devices to its existing customer base.

In Latin America, where its regional DirecTV service is restructuring under Chapter 11, Hughes CEO Jack Straw said operations were performing “as good as we could have expected” given the region’s continued economic woes, and the bankruptcy proceedings. DirecTV LatAm lost 35,000 net subs in the quarter, particularly in Venezuela, reducing total continent-wide sub count to around 1.67 million. Total revenues fell to $143 million from $227 million in second quarter 2002 due mainly to last year’s unusual boost from World Cup soccer coverage and currency devaluations.

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