2nd UPDATE: DirecTV Sees More Than 30 Million Subscribers By 2013
December 02 2010 - 2:01PM
Dow Jones News
DirecTV Group Inc. (DTV) expects to generate more than $30
billion in annual sales and serve more than 30 million customers by
2013.
"We're continuing to see momentum," Chief Executive Michael
White said during the company's investor day event on Thursday. He
added the company is on track for the best quarter of the year in
terms of revenue and subscriber growth.
The company is expected to generate roughly $24 billion in
revenue this year.
DirecTV represents a rare case of a consumer-centric company
that continued to spend even as people trimmed their budgets. The
company's decision to focus on more upscale consumers kept it
relatively insulated from the downturn in consumer spending. As a
result, its subscribers were more willing to pay for premium
services such as digital video recorders, extra pay channels and
pay-per-view events, resulting in improved profitability and growth
even as its cable competitors lost video subscribers.
For the fourth quarter, White said he expects the company to add
200,000 customers, bringing its total base to 19.1 million.
"Were gaining share," he said, adding that the rate of customer
turnover is also improving.
White said in an interview that after a strategic review he
opted to pursue an organic growth strategy, and doesn't see any
acquisitions in the near term. The company looked at places such as
China and India, but was deterred by the strict regulatory
requirements.
Looking ahead, White said the company will also deliver $5 a
share in free cash flow and earnings in 2013. He also expects the
company to buy back a third of its stock by then. White said he
sees the company buying back a similar number of shares each year
through 2013, adding the company expects to repurchase roughly $5.5
billion in stock this year.
White said the company plans to take a more "segmented approach"
in marketing, acknowledging a wider fracturing of demographics in
the country. He added that with the issue of rising costs for media
content, the company will have to communicate, and eventually pass
along those expenses to the customer.
"Elevated pricing is a reality," he said, adding the company was
exploring offsetting the increase by tweaking the packages to add
more features or channels.
Unlike the regionally based cable providers, DirecTV benefited
from higher activity in its Latin America business, which was
helped in the summer by rabid interest in the World Cup, but
continued through the third quarter.
In total, the company added 380,000 net new customers in the
third quarter, with most of the growth coming from Latin
America.
"We have demonstrated success and proven ourselves a leader,"
said Bruce Churchill, president of the company's Latin American
arm. He added the company has a number of competitive advantages
that will help it maintain its lead in the region.
The middle class in several of its regions, including Brazil, is
growing, he said, adding that he expects Brazil's market is
expected to double.
DirecTV will soon have more competition in the area. Brazilian
regulators recently removed barriers to enter the pay-TV business,
and the country's largest landline phone company, Tele Norte Leste
Participacoes S/A (TNLP4.BR, TNE), also known as Oi, said recently
it expects to launch an Internet-based TV service in the next six
months.
Churchill said the low-cost nature of the business gives
satellite TV an advantage over fixed-line companies because of the
cost required to build out the infrastructure. DirecTV, meanwhile,
is able to take advantage of the advanced services it delivers in
the U.S. and eventually move those features into Latin America.
-By Roger Cheng, Dow Jones Newswires; 212-416-2153;
roger.cheng@dowjones.com
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