2nd UPDATE: DirecTV Swings To 4Q Profit On More Customer Growth

DirecTV Group Inc. (DTV) swung to a fourth-quarter profit as the satellite-television provider continues to take market share from its cable rivals.

The El Segundo, Calif., company added 289,000 net new U.S. customers, or more than double its growth from a year ago, while its Latin America unit signed up 378,000 net new customers in the period.

The growth stands in contrast to the cable providers, which continued their slow bleed of video customers in the fourth quarter. DirecTV last year began focusing on adding higher quality customers willing to sign up for more premium services and less likely to leave, a move that resulted in an initial slowdown in new customers. The company reversed the declines in the past two quarters, and saw the largest increase in a decade in the fourth quarter.

"In the past, we've called them the industry's metronome and a well-oiled machine," said Craig Moffett, an analyst at Sanford Bernstein & Co. LLC. "We're running out of metaphors."

While consumers slashed their spending during the downturn, DirecTV was relatively protected because television service was one of the last expenses to be cut. The company's base of higher end customers--attracted to exclusives such as its NFL package--wasn't as hurt by the economic troubles.

DirecTV reported a profit of $618 million, or 74 cents a share, compared with a year-earlier loss of $32 million, or 3 cents a share. Excluding charges related to the merger, the prior-year profit would have been 48 cents.

Revenue jumped 11% to $6.62 billion.

Analysts polled by Thomson Reuters had most recently forecast earnings of 62 cents on $6.52 billion in revenue.

"We ended last year with several favorable trends and we enter this year with excellent momentum," Chief Executive Mike White told analysts.

He said he expects the U.S. business to retain its market share this year, although he warned that subscriber growth may moderate. He added that increasing programming costs would pressure margins in the second half.

"We're seeing an increased competitive intensity in the business overall," he said.

In the U.S., where the company has most of its customers, its subscriber base stood at 19.2 million as of the end of the period--3.6% bigger than a year earlier. Churn, or the rate of subscriber cancellations, dropped to 1.4% in the latest quarter from 1.5% a year earlier. Average revenue per subscriber rose 4.6%.

In contrast, the cable companies reported declines in the fourth quarter, which followed unprecedented weakness in the previous two quarters, which suggested consumers were "cutting the cord" and cancelling their pay-TV service. The strength of DirecTV and telecommunications companies AT&T Inc. (T) and Verizon Communications Inc. (VZ), however, suggest customers are switching to alternative providers.

The Latin America business has proven increasingly important in the last few quarters. It contributed $1.03 billion in revenue as all of its major financial metrics topped Wall Street expectations, Moffett said. The business is seen as the company's major growth catalyst down the line.

DirecTV's Latin America business initially benefited from the popularity of the World Cup, but the company has been able to build upon that success. White said the unit is virtually setting new subscriber growth records each quarter, and expects to take market share this year.

DirecTV shares recently rose 4.2% to $46.09.

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

--Nathan Becker and Matt Jarzemsky contributed to this article.

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