DirecTV 1st-quarter profit falls because of promotions to attract and keep customers

DirecTV 1Q profit falls 46 percent on promotions

DirecTV Group Inc., the nation’s largest satellite TV provider, said Thursday that first-quarter earnings fell 46 percent even as subscriber growth hit a four-year high. The recession was largely to blame: The company increased promotions and customers pared their spending for premium channels and pay-per-view.

In an interview with The Associated Press, DirecTV Chief Executive Chase Carey said he expects intense competition to continue in the pay-TV business, as providers jostle for consumers who have become more sensitive to price in this economy.

Still, he predicted that customers will cut their spending to only a certain point because they “care about quality TV. It is a rich experience. It’s not a commodity.” For the rest of the year, DirecTV plans to strike a better balance between promotions and customer retention and growth.

DirecTV said Monday it will combine with the entertainment unit of Liberty Media Corp. — its controlling shareholder — to form a new publicly traded company. Carey wouldn’t completely dismiss speculation that DirecTV might be bought by a phone company. “Our goal is to build DirecTV to its full potential,” he said.

In the first quarter, the El Segundo, Calif.-based company earned $201 million, or 20 cents per share. That was down from $371 million, or 32 cents per share, a year ago.

Revenue climbed 7 percent to $4.9 billion. Analysts expected profit of 33 cents per share on revenue of $4.96 billion, according to a Thomson Reuters poll. Estimates usually exclude one-time items.

DirecTV’s net new subscribers surged 67 percent to 460,000, while its customer turnover rate hit a 10-year low. DirecTV credited its package of high-definition TV, interactive, sports and digital video recorder services. The company now has 18.1 million subscribers.

But subscriber gains came at a cost. Because of discounts, monthly revenue per subscriber rose just 1 percent to $80.35. UBS analyst John Hodulik said DirecTV had previously projected a 2 percent to 3 percent increase.

Shares of DirecTV fell 25 cents to $24.08 on Thursday.

Looking ahead, DirecTV expects net subscriber growth to exceed 1 million this year. But monthly revenue per subscriber will grow more slowly, at a pace of 2 to 3 percent instead of at least 4 percent previously forecast.

Major DirecTV rivals, the cable TV companies, are ramping up Internet speeds in an effort to lure more customers. Carey said DirecTV does not intend to own a broadband business, but instead will look for more opportunities to partner with wireless phone companies as they launch faster networks.