--DirecTV books modest profit gain as LatAm subscribers
surge
--U.S. business sheds subscribers
--Company expects to gain subscribers over all in U.S. during
the second half
(Adds further details from conference call in paragraphs two
through four and 12-13, and updates share price in eighth
paragraph.)
By William Launder and Chelsea Stevenson
DirecTV Group Inc.'s (DTV) second-quarter earnings edged up as
the satellite-television provider added a record number of
subscribers in its Latin America business, offsetting subscriber
losses in its maturing U.S. market.
The second-quarter results come less than two weeks after
DirecTV and Viacom Inc. (VIA, VIAB) ended a blackout of channels
including MTV and Nickelodeon for DirecTV subscribers, sparked by a
standoff over programming fees.
DirecTV Chief Executive Michael White told analysts the company
had reached a "fair deal" with Viacom, and blamed the dispute in
part on DirecTV's size relative to that of other pay-TV
providers.
"Perhaps because of our size we get picked on to try and reset
the market more often than I think is appropriate," Mr. White told
analysts during a conference call.
DirecTV said its churn rate, or subscriber turnover, would rise
in the third quarter due to the Viacom blackout, but the company
still expects to gain subscribers over all in the U.S. business
during the second half of the year.
Meanwhile, DirecTV said it added a record 645,000 subscribers in
its Latin America division in the latest quarter, up from 472,000
subscribers acquired a year earlier. The gain brings its total to
9.1 million subscribers in the region by the end of the quarter, a
36% jump from the year earlier.
Latin America has become DirecTV's main source of growth as the
satellite-TV operator tacks on new customers from the emerging
middle classes in countries like Brazil, Colombia and Mexico. Those
gains help overshadow a slowing U.S. pay-TV market, where DirecTV
is focused more on customer retention and high-value subscribers.
The company has set a plan to boost the number of Latin America
subscribers to more than 16 million and increase annual revenue to
more than $10 billion over the next five years.
Net subscriber losses in DirecTV's larger U.S. business totaled
52,000, compared with 26,000 subscribers added a year earlier. The
total subscriber base stood at 19.9 million at the end of the
quarter, up slightly from 19.4 million a year earlier. The U.S.
still generates considerably more revenue per subscriber than the
Latin America operations, however.
DirecTV shares slid 2.6% to $48.80 Thursday; the shares have
fallen 0.5% over the past year.
"DirecTV is staying true to its message of carefully balancing
growth in favor of profitability as the U.S.," wrote ISI analyst
Vijay Jayant.
The El Segundo, Calif., company reported a profit of $711
million, or $1.09 a share, compared with year-earlier profit of
$701 million, or 91 cents a share. The latest quarter included a
$43 million pretax, noncash loss due to revaluing
U.S.-dollar-denominated liabilities at its Brazil operations.
Revenue increased 9.5% to $7.22 billion, driven by a roughly 20%
revenue increase in Latin America. Analysts were looking for
earnings of $1.14 a share on $7.21 billion in revenue, according to
a poll conducted by Thomson Reuters.
DirecTV said it was on track to meet its financial targets for
its U.S. business and is even "more bullish" on growth in the Latin
America business for the full year.
Mr. White said he was confident a pending programming deal with
CBS Corp. (CBS, CBSA) would go more smoothly than the negotiations
with Viacom. "I'm very optimistic that that will be wrapped up and
we won't have any significant issues."
Write to William Launder at william.launder@dowjones.com and
Chelsea Stevenson at chelsea.stevenson@dowjones.com
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