DirecTV subscriber adds beat view, sees strong '09

NEW YORK (Reuters) – DirecTV Group added more subscribers than expected during the fourth quarter and forecast strong growth for 2009 as increased marketing and a new AT&T partnership helps offset the weak economy.

The No. 1 U.S. satellite TV provider, controlled by cable TV mogul John Malone's Liberty Entertainment, said on Tuesday it added more than 301,000 net subscribers in the United States in the quarter. Barclays Capital analyst Vijay Jayant had forecast net additions of 240,000.

"These are nice additions," said Thomas Eagan, analyst at Collins Stewart. "Despite cable operators losing or being forecast to lose significant subs, DirecTV has managed to grow -- that makes these adds that much more impressive."

The El Segundo, California company said it would see strong net subscriber growth in the first quarter, with gross additions at or above the year-ago period. In the first quarter of 2008, DirecTV added 275,000 net subscribers.

Chief Executive Chase Carey said that despite the economic turmoil and increasing competition, the company expects earnings per share growth of over 15 percent in 2009 on revenue growth under 10 percent.

"Their outlook looks pretty strong relative to this environment and in line with expectations," said Kaufman Bros analyst Todd Mitchell.

DirecTV, which now has 17.62 million U.S. subscribers, said fourth quarter net profit fell 5 percent to $332 million from $348 million. Profit was impacted by higher marketing and customer installation costs, as well as increased depreciation expenses on its installed customer equipment such as DVRs.

Earnings per share from continuing operations rose to 31 cents from 30 cents a year earlier, when DirecTV had a higher number of outstanding shares. Wall Street analysts had on average been expecting 33 cents a share, according to Reuters Estimates.

Revenue rose 9 percent to $5.31 billion during the quarter. Analysts had on average been expecting $5.34 billion.

Shares of DirecTV initially rose on the results, before they turned negative in a broad market downturn and ended the day down 1.24 percent at $22.30.

WIRELESS SERVICE

DirecTV outperformed the slowdown in growth analysts expected at most pay TV companies due to the weaker economy as well as the impact of the end of a marketing partnership with AT&T Inc in April last year.

DirecTV and AT&T rekindled that partnership on February 1 after rival satellite operator Dish Network Corp lost out in a bid for the lucrative contract.

Carey said the new AT&T contract would have a positive impact on growth in 2009 and was an opportunity to look at developing wireless partnerships to compete with the cable industry's triple package of video, Internet and home phone services.

"Building our AT&T relationship to its full potential is a key objective," said Carey. "We also think there are real opportunities for us to put cable on its heels by developing relationships with the cellular industry as mobility becomes an increasingly central theme in people's lives."

U.S. monthly customer churn, or the rate at which customers left the service, was down to 1.42 percent during the quarter. Average revenue per user (ARPU) was up to $90.46. Jayant had forecast monthly churn of 1.5 percent and ARPU of $91.15.

Subscriber acquisition costs rose to $724, up by $8 from the prior quarter.

DirecTV Latin America also saw strong growth, adding more than 160,000 net new subscribers during the quarter.

(Reporting by Yinka Adegoke; Editing by Derek Caney, Dave Zimmerman and Bernard Orr)