DirecTV Tops Profit Estimates on Latin America Gains

DirecTV beat analysts’ first-quarter profit estimates on higher bills for U.S. customers and more subscriber sign-ups than expected in Latin America.

Earnings of $1.63 a share, excluding one-time items, topped analysts’ estimates for $1.48 a share on average. DirecTV added 361,000 Latin American customers and 12,000 U.S. subscribers, the El Segundo, California-based company said today in a statement. Analysts had estimated 227,000 for Latin America and 13,000 in the U.S., according to a Bloomberg survey.

As the pool of U.S. pay-TV customers peaks with viewers spending more time and money watching video online, DirecTV has focused on boosting revenue from each subscriber with price increases and fees for more advanced receivers. The fact that most Americans already pay for TV is driving a wave of industry consolidation, with Comcast Corp. buying Time Warner Cable Inc. and DirecTV reportedly drawing the interest of AT&T Inc.

“Fundamentally, this is about how much DirecTV is worth in a sale, and how strong their bargaining position is with AT&T and Dish,” said Tim Farrar, an analyst and founder of Telecom, Media & Finance Associates Inc., a Menlo Park, California-based research firm.

When Bloomberg News reported in March that Dish Network Corp. Chairman Charlie Ergen had approached DirecTV about a merger, some analysts said that AT&T would be a better suitor for his satellite-TV business and wireless spectrum. The Wall Street Journal reported last week that AT&T is instead considering a bid for DirecTV, and that’s raising questions about which combination makes the most sense and stands the best chance of getting past regulators.

Consolidation Wave

It’s a wave of consolidation that could sweep up -- or isolate -- DirecTV.

The backdrop is that the number of potential pay-TV customers is peaking as viewers increasingly watch video online with services like Netflix Inc. and Hulu LLC, making fast broadband connections a key offering.

The largest U.S. satellite-TV provider’s first-quarter revenue rose 3.6 percent to $7.86 billion. Analysts projected sales of $7.92 billion on average, according to data compiled by Bloomberg.

In the U.S., a customer’s average monthly bill rose 4.3 percent to $100.16. Subscribers in the U.S. reached 20.3 million. Latin American customers came to 18.1 million when including Sky Mexico, of which DirecTV owns 41 percent.

Growing Profitably

The U.S. results represent the company’s “commitment to profitably grow our businesses through significantly improving the customer service experience, disciplined expense management and productivity initiatives,” DirecTV Chief Executive Officer Mike White said in the statement. “In Latin America, despite challenging macroeconomic headwinds, we continue to profitably expand our share of the growing pay TV market.”

Shares of DirecTV rose 2.4 percent to $81.74 at the close in New York. The stock is up 18 percent this year.

DirecTV reported net income of $561 million, or $1.09 a share, down from $690 million, or $1.20 a share, a year earlier. Net income was reduced by a $281 million charge in the quarter because of currency devaluation in Venezuela.

Satellite-TV rival Dish is scheduled to report earnings before U.S. markets open on May 8.