DirecTV Profit Drops, Subs Rise in Fourth Quarter

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DirecTV CEO Mike White

UPDATED: CEO Mike White says a merger plan between Comcast and Time Warner Cable represents "unprecedented" media consolidation and the plan deserves to be "appropriately scrutinized."

DirecTV on Thursday reported fourth-quarter financials and subscriber figures that exceeded Wall Street expectations, and CEO Mike White said the proposed merger of Comcast and Time Warner Cable represents "unprecedented" media consolidation.

White said the merger plan should get "appropriately scrutinized" by government regulators, and that it has DirecTV also thinking along those lines. While some analysts expect DirecTV to attempt a merger with Dish Network, White was far more vague about his thoughts.

Consolidation, he said, is "clearly something we need to think about." He said a combined Comcast-TWC represents a "significant change in the competitive landscape."

The satellite TV giant reported quarterly earnings of $810 million, compared with $942 million in the year-ago period. Operating profit rose, but higher income tax expenses were a drag on net earnings. 

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Revenue rose 7 percent, though, from $8.05 billion to $8.59 billion.

DirecTV added 93,000 net new U.S. pay TV subscribers in the final quarter of 2013, compared with 103,000 in the same period of 2012. Northland Securities analyst Tom Eagan had predicted a subscriber gain of 83,000.

That brought the DirecTV U.S. subscriber base to 20.25 million as of the end of 2013, up from 20.08 million at the end of 2012. For the full year, the company added 169,000 net U.S. subscribers, down from 199,000 in 2012. The company said the slower growth rate was due to a focus on "higher-quality subscribers, as well as a more challenging competitive environment and mature industry."

"U.S. results beat expectations across the board," said Wells Fargo analyst Marci Ryvicker. DirecTV didn't immediately address its decision this quarter to drop the Weather Channel and what effect on subscriber trends it may have.

In its Latin American business, DirecTV has been dealing with such challenges as inflated subscriber counts, economic headwinds and foreign exchange pressures. The Latin American unit added 231,000 net new TV subscribers in the fourth quarter, compared with 658,000 in the year-ago period. Wall Street had expected Latin America growth of around 359,000 subscribers in the latest quarter.

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DirecTV on Thursday also unveiled a new $3.5 billion stock buyback program.

"Our fourth-quarter results capped off another solid year for DirecTV, as we finished the year with nearly 38 million customers across the Americas, maintaining our standing as the world’s largest and most popular video service," said White. "We exit 2013 with good momentum and look to build on that in 2014 with a strong, comprehensive strategy dedicated to building lifelong customer relationships, while driving revenue and profit growth over the long term."

He added: "In the U.S., we are well-positioned to continue strengthening DirecTV's competitiveness in the marketplace as the premier provider of video services by advancing our customer franchise, while delivering mid-single digit top- and bottom-line growth in 2014."

During a conference call with analysts, executives said they expect DirecTV to, at minimum, maintain its market share, and called the stock "significantly undervalued."

The company reported earnings prior to the opening bell on Thursday and its stock was up 3 percent during midday trading.

Satellite TV competitor Dish Network reports earnings on Friday.

Twitter: @georgszalai