3rd UPDATE: DirecTV Sees $30 Billion In Sales, 30 Million Customers By 2013

DirecTV Group Inc. (DTV) on Thursday laid out the financial picture of the satellite-TV provider for the next three years, including the expectation to generate roughly $30 billion in annual sales and serve 30 million customers by 2013.

"We're continuing to see momentum," Chief Executive Michael White said during the company's investor day event. He added the company is on track for the best quarter of the year in terms of revenue and subscriber growth.

For the fourth quarter, White said he expects the company to add 200,000 customers, bringing its total base to 19.1 million. 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 grow 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.

"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, the company expects a mid-to-high single-digit growth rate for revenue for the U.S. business over the next three years. White said he expects a slightly slower rate of net customer additions next year after a strong 2010.

The forecast looks conservative, said Collins Stewart analyst Thomas Eagan, noting that it looks a little lighter than Wall Street expectations. But he added that he believes the company will be able to exceed the estimates.

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White also 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. The company will focus on stock buybacks for the next two years, White said, noting that he wouldn't be looking at a dividend for that time.

White said the company plans to take a more "segmented approach" in marketing, acknowledging a wider fracturing of demographics in the country. The company plans to be more proactive in keeping its highest quality customers through loyalty as well as winning back former subscribers.

At the event, the company showed off a revamped version of its user interface, an iPad program that acts as a souped up remote control, and a streaming video website, as new features that it will provide to customers in the coming months.

White added that with the issue of rising costs for media content, the company will have to communicate and eventually pass along those expenses to customers.

"Elevated pricing is a reality," he said, adding the company is 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. The company expects 20% revenue growth from the business in 2011, with low-to-mid-teen level growth for 2012 to 2013.

"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.

One of its fastest growth areas is Brazil, he said, adding that he expects the market to double as it expands its own offering.

DirecTV will soon have more competition in the region. 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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