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DirecTV Reports Mixed Q1

While speculation continues to swirl around possible merger talks between DirecTV and AT&T, the satellite giant reported mixed first quarter results, with U.S. operation turning in strong financial results and its Latin American unit pressured by declining currency valuations.

Reports last week citing unnamed sources claimed AT&T had approached the satellite giant about a possible merger, adding that discussions were preliminary and could break down at any moment. Both DirecTV and AT&T have declined comment.

While a possible AT&T merger would give DirecTV some added heft, the company managed to add about 12,000 net new subscribers in the U.S. in the first quarter, slightly below some analysts’ estimates of 16,000 additions. Still, domestic revenue rose 5% to $6.1 billion and operating profit before depreciation and amortization rose 10% to $1.67 billion in the period, indicating that efforts to attract higher margin customers are succeeding.

Overall revenue of $7.86 billion were up 4% in the period and operating profit before depreciation and amortization (OPBDA) increased 7% to $1.51 billion.,

In Latin America, net new subscriber additions of 361,000 outpaced some analysts’ expectations, but currency valuation issues in Venezuela – where the Bolivar has dropped about 40% -- continued to pressure the segment. Revenue was down 0.4% to $1.7 billion and adjusted OPBDA, excluding charges, declined about 1% in the period.

“Our first quarter results continue to demonstrate the strong execution of our operations,” DirecTV CEO Mike White said in a statement. “In the U.S., operating profit before depreciation and amortization margin expanded year-over-year for the third consecutive quarter, highlighting our commitment to profitably grow our businesses through significantly improving the customer service experience, disciplined expense management and productivity initiatives. In Latin America, despite challenging macroeconomic headwinds, we continue to profitably expand our share of the growing pay TV market while delivering adjusted OPBDA margin of 30%. In addition, by leveraging the achievements of both DirecTV U.S. and DirecTV Latin America with the strength and stability of our cash flow, we continue to return cash to shareholders through stock repurchases at an industry leading clip.”