Monday, August 7, 2006

DIRECTV Reports Higher Profits, Emphasis on Quality Subscribers

DIRECTV reported U.S. gross subscriber additions of 863,000 for Q2, a decline of 10% compared to the second quarter of 2005 primarily due to the implementation of revised credit policies and dealer incentives aimed at improving the quality of new subscriber additions. DIRECTV now has 15,513,000, up from 14,670,000 a year earlier.

Q2 revenues increased 10% to $3.52 billion and operating profit before depreciation and amortization(1) nearly doubled to $977 million compared to last year's second quarter. The DIRECTV Group reported second quarter 2006 operating profit and net income both more than doubled to $741 million and $459 million, respectively, when compared to the same period last year. Earnings per share were $0.36 compared with $0.12 in the same period last year.

Highlights for the quarter:

  • Gross Subscriber Additions were 863,000 compared to 964,000 in Q2 2005.

  • Net Subscriber Additions were 125,000 compared to 225,000 a year earlier.

  • Average Monthly Subscriber Churn was 1.59%, compared to 1.69% a year earlier.

  • ARPU was $71.59, compared to $67.79 a year earlier.

"In many ways, the results in the quarter reflect our strategy to target higher quality subscribers. For example, although gross subscriber additions of 863,000 and net additions of 125,000 in the quarter were below expectations, it's important to note that we added 11% more higher quality gross subscribers in the quarter compared to last year. This trend -- which is driving both the top-line and bottom-line financial results -- is primarily due to the ongoing changes we're making to refine our credit policy and dealer network. These factors played an important role in reducing DIRECTV's monthly churn rate from 1.69% to 1.59% this quarter. In addition, customers are buying more premium services such as high definition programming and digital video recorders which is contributing to the strong ARPU growth of 5.6% in the quarter. The increase in operating profit -- excluding the accounting effect from the new lease program -- is also directly linked to the improved subscriber mix primarily due to the reduced acquisition costs associated with the significant reduction in lower quality customers attained and the related lower bad debt expense incurred," stated Chase Carey, president and CEO of The DIRECTV Group.

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