DirecTV Third-Quarter Earnings Rise, U.S. Sub Growth Accelerates
UPDATED: The CBS-Time Warner Cable carriage dispute "undoubtedly benefited" the satellite TV company, led by CEO Mike White, says one analyst.
DirecTV added 139,000 U.S. subscribers in the third quarter, compared with a year-ago gain of 67,000 and well ahead of analysts' estimates, as the satellite TV giant exceeded most Wall Street expectations with its latest financial report.
The company ended September with 20.16 million U.S. pay TV customers. Some analysts had suggested that DirecTV could benefit from the carriage dispute between CBS Corp. and Time Warner Cable, which saw the latter lose more subscribers than usual in the third quarter. During a conference call with analysts on Tuesday, though, CEO Mike White said his company was not overly aggressive in trying to pick off TWC customers during its dispute with CBS.
"What goes around comes around," White said. He suggested that consolidation among cable companies -- competitors to DirecTV -- could strengthen the hands of all distributors when it comes to carriage negotiations. "Having stronger distributors that would negotiate tough on content fees -- given how outrageous the increases have been -- would be a good thing," he said. "We would certainly welcome that."
White said DirecTV is paying 50 percent more this year than last year in retransmission broadcasting fees and such growth "isn't sustainable."
Evercore Partners analyst Bryan Kraft said in a first reaction after Tuesday's earnings report that "the Time Warner Cable-CBS dispute undoubtedly benefited DirecTV's subscriber trends during the quarter."
DirecTV also added 260,000 net subscribers in Latin America in the third quarter, but that was down from 543,000 in the year-ago period and below analysts' forecasts amid continuing challenges in the region.
DirecTV reported third-quarter earnings of $699 million, compared with $565 million in the year-ago period and analysts' average forecast of $556 million. Revenue rose 6 percent to $7.88 billion, narrowly beating the average Wall Street forecast of $7.84 billion.
White also addressed reports that DirecTV is considering adoption of an Aereo-like service to get free access to over-the-air broadcast transmissions.
"We have done some work this year to see whether form an R&D standpoint we might see additional ideas going forward that could be leveraged," in response to a question about Aereo's technology.
"If retransmission fees continue to double," said White, "there is a point at which customers are going to insist they'll save the money and put up an antenna on their home."
DirecTV also said that its U.S. average monthly revenue per sub rose 6.2 percent to $102.37, crossing the $100 mark. It cited subs taking more service, price increases and higher pay-per-view revenue among the drivers.
"DirecTV's diversified portfolio of businesses across the Americas delivered another solid quarter of consolidated results highlighted by strong topline growth and continued operational discipline across disparate geographies, macroeconomic conditions and competitive environments," said White in the company's earnings release.
He added: "We continue to extend our position as the world's largest pay TV service by leveraging the strength of our premier brands and our differentiated suite of products and services across the Americas to drive industry-leading growth."
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