Direct-broadcast satellite provider DirecTV Inc. fell short of its third-quarter subscriber acquisition goals, but increased both revenue and cash flow as it focused on higher-end customers.
In reporting its third-quarter numbers last week, parent Hughes Electronics Corp. said DirecTV added 206,000 net subscribers during the quarter, short of its goal of 250,000 to 300,000. But year-over-year quarterly revenue climbed from $1.36 billion to $1.6 billion, while cash flow — or, more accurately, earnings before interest, taxes, depreciation and amortization (EBITDA) — rose from $20 million to $196 million.
The numbers were in line with forecasts.
"We are focused on profitable subscriber growth and increasing our cash flow," said DirecTV president Roxanne Austin. "We'll have positive operating cash flow in the second half. We've shifted our focus from just maximizing subscriber growth to maximizing our overall financial performance."
Company executives attributed the drop in subscribers to lower nationwide sales and increased churn that stemmed from a tightening of piracy loopholes. For instance, the National Rural Telecommunications Cooperative lost 31,000 DirecTV subscribers in the quarter.
DirecTV also replaced some old conditional-access cards, which contributed to churn, said Hughes president and chief executive officer Jack Shaw.
Per-sub revenue up
The DBS provider's monthly churn rate was 1.7 percent, slightly higher than the company's historical average, said Austin. Some 50,000 signal pirates dropped the service, she said.
Overall gross subscriber additions totaled 682,000 for the quarter, the company said.
But on a per-month basis, revenue per subscriber rose to $59.20, Austin said. Driving that upsurge were local channel availability, whole-house packaging offers and the elimination of DirecTV's lowest-priced product.
Fourth-quarter RPU figures are expected to rise to $62 per month, thanks to the National Football League's "NFL Sunday Ticket" out-of-market pay-per-view package.
Austin raised DirecTV's full-year revenue guidance from $6.3 billion to $6.38 billion, and its EBITDA guidance from $535 million to $580 million. But by refocusing on quality subscribers, DirecTV will come up short of its earlier goal of adding 1.2 million subscribers this year.
Austin said DirecTV would likely add 1 million to 1.05 million new subscribers in 2002, including 250,000 to 300,000 net fourth-quarter additions.
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