Skip to main content

DirecTv Growth Brightens Hughes Earning Report

Strong subscriber growth from its DirecTv Inc.
direct-broadcast satellite subsidiary led Hughes Electronics Corp. last week to report a
27.9 percent increase in revenues for 1997 over 1996.

Hughes is now a pure-play telecommunications company,
having spun off its Hughes Defense and Delco Electronics divisions last year.

Hughes' revenues for 1997 were $5.13 billion, up from
$4.01 billion in 1996.

The company's direct-to-home broadcast division --
which includes DirecTv's domestic DBS service, as well as foreign DTH ventures --
posted revenues of $1.28 billion last year, up from $621 million in 1996. Operating losses
for the division decreased from $319.8 million in 1996 to $254.6 million in 1997.

Charles H. Noski, president of Hughes, said he does not
expect DirecTv to reach financial breakeven this year. More realistically, he said,
DirecTv will show a profit sometime in 1999.

'We had very high expectations of [DirecTv president]
Eddy Hartenstein and his group,' Noski said. 'He met our expectations in
1997.' While Noski would not project subscriber growth for this year, he said he
expects DirecTv to meet or exceed last year's acquisition numbers.

During the last quarter of 1997, when DirecTv added more
than 409,000 U.S. subscribers with the help of a $100 discount on hardware installation,
the cost of acquiring a new subscriber was close to the high $300s, Noski said. For 1998,
the average cost of acquisition per subscriber may be in the low-$400-range, he added.
That expense will include the cost of new marketing campaigns that the company has yet to

Noski put the value per DirecTv subscriber at around
$2,000. Today's DirecTv subscribers pay an average of about $47 each month in
programming fees, he said.

DirecTv's churn rate has remained consistent at about
one-third the rate of cable, Noski said -- just a little above or below 1 percent in any
given month.

Although DirecTv may be in a position technologically over
the next few years to use Ka-band satellites to deliver local channels via satellite,
Noski said it may not be economically feasible for the company to do so on its own.

'You've got to get a lot of people spending $4 to
$6 per month before it makes sense' to launch and operate new satellites for such a
service, he said.