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Carey: Hughes to Focus on DirecTV

In his first quarterly conference call with analysts since News Corp. took control of Hughes Electronics Corp., Hughes president and CEO Chase Carey said 2004 will be characterized by some big changes, adding that its DirecTV Inc. direct-broadcast satellite unit will be the main focus of the company.

"I expect 2004 to be a bigger year with much bigger changes," Carey said on the conference call discussing fourth-quarter results. "It will really be a year of transformation where we implement a plan that sets DirecTV on a course to maximize its long-term value and potential."

DirecTV reported strong fourth-quarter results, driven by the addition of 405,000 net new subscribers in the period and 1.19 million over the full year, both records for the DBS operator.

Revenue was up 24% to $2.26 billion and operating profit before depreciation and amortization declined 17% in the quarter to $166 million from $200 million a year earlier.

On the corporate side, Carey said the first step was the reduction of Hughes’ corporate staff by about one-half and consolidating Hughes’ and DirecTV’s support functions.

Hughes is made up primarily of three businesses -- DirecTV, satellite manufacturer PanAmSat Corp. and technology company Hughes Network Systems. Carey said the focus will now be on DirecTV, and the company "has begun to evaluate how PanAmSat and HNS fit within a DirecTV-driven strategic vision."

Carey also said that in 2004, DirecTV will add about 1 million net new subscribers -- he predicted that total customers would be more than 15 million in the next three years, up from the current 12 million -- and new products like digital-video recorders and interactive services would reduce churn and raise average revenue per unit to above $70 from its current level of $63.90.

He added that DirecTV will attack niche areas its previous management neglected, like introducing more ethnic programming, driving subscriber growth in multiple-dwelling units and developing specialized sales channels and partnerships with telephone companies, local broadcasters, wireless-telephony players and security companies.

But that growth will come at a price: DirecTV’s capital expenditures will rise from $389 million in 2003 to between $500 million-$600 million in 2004, Carey said. That additional cost will mainly come from launching new satellites and rolling out more DVR boxes and interactive services.

Carey did not say how many more birds the DBS giant would launch.