Missing in Action: DTV Surpasses Expectations w/ 2Q Sub Adds

In the midst of 2Q basic subs losses for cable, DirecTV [DTV] added a horde of new customers-455K to be exact. That’s far above analyst expectation of less than 300K adds, prompting Merrill Lynch analyst Jessica Reif Cohen to title her subsequently released note, "Holy Cow! Now We Know Where the Subs Have Gone." Reif Cohen said the unexpected adds were startling, given that 2Q "is typically seasonally the slowest quarter of the year," and that adds tied to its NFL Sunday Ticket package aren’t quantified until 3Q. DirecTV CEO Chase Carey said the company has "really built momentum," and promised investors that the gains aren’t mere "1-quarter flashes." Carey did warn shareholders that cable would likely put up a fight in the remaining 2 quarters, in a bid to lure churned customers back into the fold. The battle for subs is a double-edged sword, however. The DBS provider actually swung to a loss in the quarter, hurt by the costs associated with acquiring the legion of new customers ($645 a head, up from the 2Q ’03 figure of $595). DirecTV reported a net loss of $13.3mln, or 1 cents a share, compared with year-earlier net income of $22.6mln, or 2 cents a share.