DirecTV profits rise as subscribers stay loyal
 

DirecTV, the biggest US satellite operator, reported a 14 per cent increase in its revenues in the first quarter to .19bn, with operating profit relative to last year more than doubling to 5m.

Although the number of new subscribers was 19 per cent lower than the first quarter of 2005, analysts said the rate at which subscribers cancelled their services (churn rate), meant the quality of the subscribers was higher. For example, UBS analysts had predicted a 1m increase in gross new subscribers but a 1.62 per cent cancellation rate. DirecTV reported a rate of 1.45 per cent.

The rate of cancellation is particularly significant in light of the increased competition for subscribers from cable rivals, who are increasingly offering telephone and high-speed internet services with video services too.

Lower cancellation rate means that customers pay their monthly fees for a longer time. This is important because once the initial cost of hooking up a new subscriber is covered, further payments become more profitable.

According to Chase Carey, president and chief executive officer of DirecTV, “The continued improvement in the quality of our subscriber base contributing to the first year-over-year improvement in churn in nearly two years as average monthly churn fell to 1.45 per cent in the quarter”.

Aryeh Bourkoff, analyst at UBS said, “DirecTV continues a more targeted approach to subscriber additions”. In response to the cable industry’s ability to offer a bundle of services and as telecommunications companies prepare to also sell phone, internet and video packages DirecTV is in talks to find a way to offer high-speed internet access.

It is difficult to offer such two-way services via satellite. However, DirecTV is considering, for example, wireless broadband technologies such as Wimax.

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