DirecTV did net a tidy 240K sub additions in 3Q, but hefty increases in the associated SAC and upgrade costs somewhat marred the satcaster’s balance sheet. While CEO Chase Carey acknowledged that cost improvements are necessary, he was nonetheless pleased with demand. One-half of the 1.03mln gross adds in the Q took at least 1 advanced service, he said, helping raise advanced product penetration to just under 40%, up nearly 10 percentage points over last year. Churn is improving, ARPU rose in spite of the large number of pricing discounts and promotions, and high-quality subs continue to flock to DirecTV, Carey added. In a research note, Sanford Bernstein’s Craig Moffett agreed that the net sub additions metric “is a clear win” and that DirecTV enjoys “the most affluent customer base in all of Pay-TV,” which he said helps insulate against current US economy woes. Moffett also believes DirecTV owns the best video product available. But, he noted that “DirecTV has fallen unsustainably far behind its competitors in HDTV penetration, and has over- earned for years due to this under-spending. Now comes the cost of catching up.” Moffett rates DirecTV as ‘underperform,’ target $19. Future costs will abate as advanced services tech becomes cheaper, said Carey, who expects an increasingly efficient direct sales channel (and cable defectors) to drive continuing improvement in demand HD/DVR services. True to recent form, pay-TV investors keyed on sub additions and sent DirecTV’s stock up 2.53% Wed, even in the face of a 361-point market plummet. — The satcaster also promoted Steven Roberts to svp, new media and business development, and added local high-def channels in Anchorage and Juneau, AK.

The Daily


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