UPDATE: DirecTV 3Q Profit Up But Turnover Rises

DirecTV Group Inc.'s (DTV) third-quarter profit inched higher, but more customers cancelled their service in a sign that the satellite TV provider may no longer be above the video fray.

The El Segundo, Calif., company has remained surprisingly resilient over the last several quarters as the cable providers and telecommunications companies duked it out over rival television, Internet and phone services. Its high-definition programming and sports packages have kept it relatively protected in the past, but that advantage is fading as consumers drop the premium services. In most recent quarter, it posted a 13% decline in subscriber addition, while the subscriber turnover rate rose.

DirecTV reported a third-quarter profit of $366 million, or 37 cents a share, up from $363 million, or 33 cents a share, a year earlier.

Revenue, meanwhile, jumped 9.7% to $5.47 billion.

Analysts surveyed by Thomson Reuters expected earnings of 39 cents on revenue of $5.42 billion.

Operating margin declined to 12.5% from 13.2%.

DirecTV added 136,000 new U.S. subscribers to bring its total base to 18.4 million. The turnover rate rose to 1.72% from 1.64% a year ago, although the average monthly revenue per subscriber rose 2.1%.

Over the last few quarters, the company had picked off customers from the cable companies and rival Dish Network Corp. (DISH). But the phone companies with which DirecTV also partners are starting to show they're a credible threat with their own television offerings.

Barclays analyst Vijay Jayant cited the lower customer growth to the company's more disciplined approach to spending on retaining and adding customers. He noted the company cut its retention spending by 12% over a year ago.

While AT&T Inc. (T) and Verizon Communications Inc. (VZ) both sell DirecTV in certain parts of their territories, both are focusing more on pushing their own service, U-Verse from AT&T and FiOS from Verizon.

The company's Latin America operations posted a 16% increase in revenue on strong subscriber growth.

DirecTV is set to combine with various assets from Liberty Media Corp. into a new publicly-traded company.

The company's shares recently traded up 78 cents, or 2.9%, at $27.63.

-By Roger Cheng, Dow Jones Newswires; 212-416-2153; roger.cheng@dowjones.com

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