DirecTV's net grows with 'subs'

DirecTV's net income climbed to $371 million in the first quarter.

LOS ANGELES (AP) -- Satellite television company DirecTV Group Inc. said Wednesday its first-quarter earnings rose 10.4% after acquiring a surprising number of new U.S. subscribers amid a major housing meltdown.

The El Segundo, Calif.-based company said net income climbed to $371 million, or 32 cents per share, in the three months ended March 31 from $336 million, or 27 cents per share, a year ago.

It added 275,000 net U.S. subscribers, well above analyst expectations of about 180,000, and increased its domestic subscriber base by 5.2% to 17.1 million.

"The overarching question is where are all these subscribers coming from?" said analyst Craig Moffett of Sanford C. Bernstein & Co. "Last time I looked, the news said we were on or near a recession. And yet the pay TV market seems to be undergoing some kind of renaissance."

DirecTV (DTV, Fortune 500) shares rose $1.22, or 4.7%, to $27.02 in trading Wednesday, near the high end of their 52-week range of $18.20 to $27.73.

Revenue rose 17% to $4.59 billion from $3.91 billion.

Analysts surveyed by Thomson Financial expected a net profit of 31 cents per share on revenue of $4.47 billion.

Chief executive Chase Carey said subscriber growth continued upward despite economic headwinds.

"I wouldn't attribute much to the economy one way or the other," he told analysts on a conference call. "It has not had a material impact on the results you're seeing from us."

Average monthly revenue per U.S. subscriber rose 8.6% from a year ago to $79.70, driven by price increases for programming, higher fees for high-definition and digital video recording equipment and services and better pay-per-view sales, the company said.

Carey also said the company was "on track" to achieving its annual subscriber growth target, despite AT&T Inc.'s (T, Fortune 500) decision to stop bundling DirecTV services in marketing packages in favor of Dish Network Corp. (DISH, Fortune 500) in the former BellSouth Corp. region starting April 1.

"We're saving money that we can deploy in other ways to effectively capture subs," he said.

The company added 200,000 net subscribers in Latin America, boosting the subscriber base 24% to 3.5 million. Monthly revenue per subscriber rose 20% to $53.52, thanks to a weak U.S. currency and growth in Venezuela and Argentina.

DirecTV also said media mogul John Malone's Liberty Media Corp. (LINTA) had agreed to restrict its voting interest to 48% to allow DirecTV to increase its share repurchase program to $3 billion, up from $1 billion announced earlier, funded by up to $2.5 billion in new debt.

In late February, Liberty Media acquired a 41% stake in DirecTV by swapping a 16% stake in News Corp (NWS, Fortune 500). plus $625 million in cash.

In April, Liberty increased its stake in the satellite television provider to 48%, and analysts had expected Liberty to attempt to buy the whole company.

Following Wednesday's announcement, analysts continued to speculate that an eventual takeover of the company was not far off.

The voting rights cap "allows Liberty more time to decide what it wants to do to structure a better deal," said Goldman Sachs analyst Ingrid Chung in a research note.

Morgan Stanley analyst Benjamin Swinburne said the moves "are likely interim steps that allow DirecTV to continue to buy back its shares while the two companies continue exploring structure rationalization."