DirecTV boosts U.S. revenues to $6.09B, but net income declines

DirecTV (NASDAQ: DTV) reported a 4 percent year-over-year revenue improvement in the first quarter when, worldwide, the satellite provider brought in $7.86 billion. But earnings per share fell to $1.09 compared to $1.20 a year previously, below analysts' estimates, as net income fell to $561 million.

U.S. operating profit expanded year-over-year for the third consecutive quarter, "highlighting our commitment to profitably grow our business through significantly improving the customer service experience, disciplined expense management and productivity initiatives," President-CEO Mike White said in an earnings release.

U.S. revenues for the quarter were $6.09 billion, compared to $5.79 billion in the year-ago period, the company's statistics showed. ARPU also went up to $100.16 a month versus $96.05 a year ago as average monthly subscriber churn stayed even at 1.45 percent.

Year-over-year net subscriber gains were 12,000 as DirecTV now has 20.27 million U.S. subscribers. Gross subscriber additions of 891,000 were about the same as last year's 893,000.

Latin American revenues and ARPU were down. Revenues of $1.72 billion were $8 million less than the same period in 2013 and ARPU of $48.83 was down from $54.23 year-over-year.

"In Latin America, despite challenging macroeconomic headwinds, we continue to profitably expand our share of the growing pay TV market while delivering adjusted OPBDA (Operating Profit Before Depreciation and Amortization) margin of 30 percent," White noted in the earnings release.

The results drew praise and caution from analyst Craig Moffett of MoffettNathanson who, in an analyst note, said that "DirecTV is exceptionally well managed, they have very good product, they generate a ton of cash and they buy back a tremendous amount of stock."

On the other side of the ledger, though, DirecTV is noticeably lacking in an element every video player needs these days: a broadband connection. That's led to some speculation of late that the satellite provider will be acquired by AT&T (NYSE: T) for what some believe will be about $40 billion.

That's not the most sensible move out there for either company, Moffett said. The most sensible move would be to merge with fellow satellite provider Dish Network (NASDAQ: DISH) but "that avenue is very likely blocked" by regulators.

"Neither DirecTV nor Dish Network is a particularly good fit for AT&T," Moffett noted, but if a merger is going to happen for reasons other than fit, "DirecTV brings by far the better brand, the better management team and the better business … but no spectrum."

Dish, on the other hand, has been stockpiling spectrum which every wireless provider covets more than gold. But Dish, Moffett continued, has "a weak brand and a struggling business."

For now, DirecTV will have a challenged business model because "cable's ability to bundle broadband and video presents an almost insurmountable pricing challenge to satellite TV."

For more:
- DirecTV has this earnings release
- MoffettNathanson has this analyst note (sub. req.)

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