DirecTV Swings to Profit on Tighter Credit for Subscribers

DirecTV Group Inc., the nation’s largest satellite TV company, returned to a profit in the first quarter as stricter credit policies led to higher earnings per subscriber.

The company, based in El Segundo, said Thursday that it earned $235.2 million, or 17 cents a share, for the three months ended March 31, contrasted with a loss of $41.4 million, or 3 cents, a year earlier. Revenue grew 8% to $3.39 billion from $3.15 billion.

The company’s domestic pay-TV service added 919,000 subscribers during the quarter, a drop of 19% from the same period last year. But after accounting for subscribers who later dropped their service, an industry measure called “churn,” the service added 255,000 net subscribers.

The total number of DirecTV subscribers increased 7% in the quarter to 15.39 million.

“Similar to recent quarters, this solid growth was driven by our large and growing subscriber base, strong ARPU [average revenue per subscriber] growth and higher operating margins due mostly to the significant scale and operating leverage of our business,” Chief Executive Chase Carey said in a statement.

Analysts expected DirecTV to post a profit of 10 cents a share, according to Thomson Financial.

Carey said the cost to add subscribers was higher because of the cost of new set-top boxes with increased functionality. Those costs were spread over few new subscribers as the company continued to tighten credit policies to weed out those most likely to cancel their service early.

Carey said he continued to foresee a tough competitive environment as cable TV companies push bundled packages of services including phone and high-speed Internet access.

The company has not yet decided on its own strategy to offer broadband Internet service, Carey said.

DirecTV had been rumored to be discussing a partnership with EchoStar Communications Corp., operator of the Dish TV service, to develop a broadband service to compete with cable.

But Carey said no progress had been made.

“It continues to be an area we spend significant time on,” Carey said during a conference call with analysts. “We will move forward and do something when and if we have an arrangement that makes sense for us.”

DirecTV offers customers its TV service along with DSL from regional phone companies in many areas of the country.

Looking ahead, the company said the launch next year of two additional satellites that would make its high-definition TV signal available to three-quarters of all U.S. households would drive future growth.

DirecTV shares fell 58 cents, or 3.8%, to $16.59.