DirecTV quarterly profit increases 8.5% as US customer gains slow

New York: DirecTV, the largest US satellite-TV provider, reported an 8.5 per cent increase in first-quarter profit as it focused on retaining US customers rather than adding new ones. Net income rose to $731 million (Dh2.68 billion) from $674 million a year earlier, the California-based company said in a statement.

DirecTV is using programming, including its exclusive NFL Sunday Ticket football package, to persuade customers to stay and fend off competition from Dish Network and cable carriers such as Comcast. CEO Mike White, seeking to preserve profit margins, said on a conference call that DirecTV will continue to focus on customer retention instead of trying to win new users with aggressive promotions.

"DirecTV is choosing to spend on the subscribers that it chooses to attract," Vijay Jayant, an ISI Group analyst in New York, said in an email. DirecTV "is staying true to its message of carefully balancing growth in favour of profitability." The company added 81,000 US customers in the quarter. Growth slowed from 125,000 additions in 2011's fourth quarter and 327,000 in the third quarter. Average monthly revenue per US subscriber rose 3.6 per cent to $91.99. The company reduced promotional discounts for new customers by about $5 per month in February, White said on the conference call. DirecTV said last month it would again offer NFL Sunday Ticket to new customers for free.

Record customers

Cutting back on lower-priced offerings will raise average monthly revenue "as we go through the year," White said. In Latin America, DirecTV added a record 593,000 customers after signing up 590,000 in the previous quarter.

Sales increased 12 per cent to $7.05 billion from $6.32 billion. Analysts projected $7.04 billion.

"Very solid quarter for DirecTV, with continued strength in Latin America, and better-than-expected margins driving outperformance relative to our expectations," said Joel Levington, managing director of corporate credit at Brookfield Investment Management in New York.

The company bought back $1.3 billion of its stock in the quarter.

Meanwhile, Dish Network, the second-largest US satellite-television provider, reported first-quarter profit that topped analysts' estimates after attracting more subscribers. Earnings totalled 80 cents a share, the Colorado-based Dish said in a statement.

Analysts projected 69 cents, the average of nine estimates compiled by Bloomberg. Sales rose 11 per cent to $3.58 billion, compared with the $3.62 billion average analyst estimate.

Swirl of speculation

Dish added 104,000 customers in the quarter, more than the 54,000 average of 11 estimates in a Bloomberg survey. The gains signal that Dish's products and marketing tactics are working.

"Dish is a swirl of speculation about mergers and acquisitions and asset sales," New York-based Craig Moffett, an analyst at Sanford C. Bernstein & Co said.

Investors are awaiting for any clarity Dish provides about when the Federal Communications Commission may rule on the company's effort to use satellite spectrum to provide voice and data service over land-based towers.

Ergen has said Dish is committed to transition from a TV provider to a wireless company, although analysts including ISI Group's Vijay Jayant doubt Ergen will actually build a network. Dish is more likely to partner with a wireless company or sell the spectrum, Jayant said.

"The question of what Dish will ultimately do with its large trove of spectrum will be front and centre of investor attention," Jayant, who values the spectrum at about $8 per Dish share, said before the results.