Premium Services Drive DirecTV’s Q2 Growth

HD, DVR Subscribers Generate More Revenue
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Direct-broadcast satellite operator DirecTV saw subscriber growth of 5.2% year-over-year in the United States and 69.7% in Latin America.

Revenues for the second quarter grew 17% to $4.1 billion from $3.5 billion in the same quarter a year ago, largely driven by growth in subscribers and ARPU (average revenue per subscriber), which was 6.8% in the United States and 19% in Latin America.

Operating income before depreciation and amortization grew 16% to $1.1 billion from $976 million, boosted by a $25 million hurricane-insurance claim. The increase was partially offset by higher upgrade and acquisition costs as customers migrate to HD and digital-video-recorder services.

“It's important to highlight that households with HD and/or DVR services generate superior financial returns due to the significantly greater cash flows compared to homes without these services." DirecTV president and CEO Chase Carey -- who extended his employment agreement with the DBS provider through Dec. 31, 2010 -- said in a statement.

Operating income was essentially flat at $740 million from $741 million a year ago, while net income slipped 2.3% to $448 million from $459 million in Q2 2006 on higher depreciation and amortization costs, as well as the consolidation of Sky Brazil in the Latin America group.

Cash flow before interest and taxes declined to $305 million from $400 million and free cash flow dropped to $201 million from $397 million on higher capital expenditures primarily related to an increase in leasing of HD and DVR equipment, as well as higher infrastructure costs associated with the implementation and rollout of additional HD programming.

The DirecTV U.S. group’s net subscriber additions were 128,000 in the quarter, raising its total subscriber base to 16.3 million. Average monthly churn ticked lower to 1.58% from 1.59% in Q2 2006. ARPU was $76.43 versus $71.59 a year ago, reflecting a 50% increase in HD and DVR customers in the quarter.

In the Latin America group, net additions totaled 141,000 to bring total subscribers to 2.9 million. The average churn rate dropped to 1.38% from 1.46% in the same quarter a year ago. ARPU was $47.51 versus $39.78 last year.

Additionally, DirecTV’s board authorized up to a $1 billion share-repurchase program.

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