DIRECTV U.S. subscribers down 84,000 in 2Q 2013

Thursday, August 1st, 2013

EL SEGUNDO, Calif. — DIRECTV (NASDAQ:DTV) today announced an increase in second quarter 2013 revenues of 7% to $7.70 billion, operating profit before depreciation and amortization (OPBDA) of 4% to $2.08 billion, a decline in operating profit of 4% to $1.35 billion, and higher earnings per share of 8% to $1.18 compared to last year’s second quarter.

DIRECTV U.S. Segment

In the quarter, DIRECTV U.S. revenues increased 5% to $5.94 billion compared with the second quarter of 2012 primarily due to strong ARPU growth along with a larger subscriber base. DIRECTV U.S. net subscribers declined more in the quarter principally due to lower gross subscriber additions associated with a continued focus on higher quality subscribers, as well as a more challenging competitive environment and mature industry. The average monthly churn rate in the quarter was unchanged at 1.53%. ARPU increased 4.6% to $98.73 mostly due to higher advanced receiver service fees, price increases on programming packages, higher fees for a new enhanced warranty program, and increased commercial revenues partially offset by increased promotional offers to new and existing customers as well as lower pay-per-view revenues mainly due to the timing of events. DIRECTV U.S. ended the quarter with 20.02 million subscribers compared with 19.91 million subscribers reported for the quarter ended June 30, 2012.

Subscriber Data (in 000’s except Churn):

                                             Three Months Ended     Six Months Ended
                                                       June 30,             June 30,
                                                2013       2012       2013       2012
                                           ---------  ---------  ---------  ---------
Gross Subscriber Additions                       839        863      1,732      1,804
Average Monthly Subscriber Churn               1.53%      1.53%      1.49%      1.48%
Net Subscriber Additions (Disconnections)       (84)       (52)       (63)         29
Cumulative Subscribers                        20,021     19,914     20,021     19,914

DIRECTV Latin America

In the second quarter, DTVLA revenues increased 12% to $1.69 billion compared to the same period last year principally due to strong subscriber growth over the last year partially offset by a 10.6% decline in ARPU. Net additions of 165,000 were lower than the year ago period as the increase in gross additions was offset by higher churn. Gross additions increased 6% to an all-time record of 1.19 million principally due to greater middle market demand, most notably in Argentina, Brazil and Colombia. Total average monthly churn increased to 3.10% and average monthly post-paid churn increased to 2.86% mainly due to higher churn in Brazil primarily related to subscribers that were terminated due to the improper crediting of certain customer accounts, including approximately 200,000 subscribers previously reported in the Sky Brasil subscriber base on March 31, 2013*. Also impacting churn in Brazil were more challenging economic and competitive conditions, as well as the effect of a higher mix of middle market subscribers.

Subscriber Data** (in 000’s except Churn):

                                               Three Months Ended      Six Months Ended
                                                         June 30,              June 30,
                                                  2013       2012       2013       2012
                                             ---------  ---------  ---------  ---------
Gross Subscriber Additions                       1,189      1,119      2,370      2,153
Average Monthly Total Subscriber Churn*          3.10%      1.80%      2.51%      1.80%
Average Monthly Post-paid Subscriber Churn*      2.86%      1.51%      2.31%      1.49%
Net Subscriber Additions*                          165        645        748      1,238
Cumulative Subscribers*                         11,077      9,116     11,077      9,116

* Based on the results of an internal investigation, DTVLA has determined that, beginning in 2012, certain employees of Sky Brasil directed activities which are inconsistent with Sky Brasil’s authorized policies for subscriber retention and churn management. These activities had the effect of artificially reducing churn and increasing the Sky Brasil subscriber base during portions of 2012 and 2013. As a result, subscribers who would have previously ceased receiving Sky Brasil service are being terminated as subscribers pursuant to Sky Brasil’s authorized policies. See DIRECTV’s Current Report on Form 8K filed June 27, 2013 for further details. Prior year results for subscribers, churn and ARPU have not been adjusted for the findings of this investigation.
** DIRECTV Latin America subscriber data exclude subscribers of the Sky Mexico service. In addition, DTVLA gross and net additions exclude 7,000 video subscribers acquired during the three months ended June 30, 2012 as well as 1,000 and 7,000 video subscribers acquired during the six months ended June 30, 2013 and June 30, 2012, respectively. DTVLA cumulative subscriber counts include these acquired customers.

DIRECTV Latin America owns approximately 93% of Sky Brasil, 41% of Sky Mexico and 100% of PanAmericana, which covers most of the remaining countries in the region. Sky Brasil and PanAmericana ended the second quarter with 5.17 million and 5.91 million subscribers, respectively. Sky Mexico, whose results are accounted for as an equity method investment and therefore are not consolidated by DTVLA, had approximately 5.65 million subscribers as of June 30, 2013, bringing the total subscribers in the region to 16.72 million.