DTH

DirecTv?s US, Brazil ARPU up; Latin, pan-Americana ARPU down in Q3-2014; rev improves

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BENGALURU: DirecTv announced its Q3-2014 results (quarter ended 30 September 2014, current quarter). The company reported 4.8 per cent growth in its US segment?s monthly average revenue per user (ARPU) from $ 102.37 in Q3-2013 to $ 107.27 in the current quarter. During the nine month period ended 30 September 2014 (9M-2104, ytd) ARPU from the US segment rose 4.6 per cent to $ 103.57 from $ 99 in 9M-2013.

Its Sky Brasil segment reported 6.2 per cent growth in ARPU to $ 60 in Q3-2014 from $ 56.50 in Q3-2013. During 9M-2014, ARPU reduced fractionally by 0.6 per cent to $ 59.57 from $ 59.9 in 9M-2013.

DirecTv?s Latin America segment ARPU at $ 48.88 in Q3-2014 fell 1.1 per cent from $ 49.92 in Q3-2013. 9M-2014 ARPU at $ 49.02 was 5.1 per cent lower than the $ 51.68 in 9M-2013.

Pan Americana segment reported the sharpest ARPU fall of 8 per cent to $ 39.64 in Q3-3014 from $ 43.07 in the corresponding year ago quarter. ARPU in 9M-2014 fell 9.4 per cent to $ 40.12 from $ 44.27 in 9M-2013.

Subscribers:

The company reported a subscriber churn of 1.73 per cent in its US segment in Q3-2014 versus a churn of 1.61 per cent in Q3-2013. Ytd subscriber churn was 1.58 per cent versus 1.53 per cent in 9M-2013. The number of cumulative subscribers rose 0.2 per cent to 20.203 million in Q3-2014 and 9M-2014 from 20.160 million in Q3-2013 and 9M-2013.

DirecTv Latin America (DTVLA ) owns approximately 93 per cent of Sky Brasil, 41 per cent of Sky Mexico and 100 per cent of PanAmericana, which covers most of the remaining countries in the region. Sky Mexico, whose results are accounted for as an equity method investment and therefore are not consolidated by DTVLA, had approximately 6.52 million subscribers as of 30 September 2014, bringing the total subscribers in the region to 18.87 million.

To its Sky Brasil segment, the company added net 27,000 subscribers in Q3-2014 to reach a total of 5.644 million as compared to 88,000 subscribers added to reach cumulative subscribers of 5.255 million in Q3-2013. During 9M-2014, Sky Brasil added 273,000 subscribers versus the 216,000 subscribers added in 9M-2013. The company has not reported churn for its Sky Brasil segment.

The number of cumulative subscribers for Latin America segment in Q3-2014 and 9M-2014 rose 9 per cent to 12.353 million from 11.337 million in Q3-2013 and 9M-2013. Average total subscriber churn in Q3-2014 was 2.99 per cent against 2.27 per cent in Q3-2013. Churn during 9M-2014 was 1.94 per cent, lower than the 2.18 per cent churn in 9M-2013.

For its Pan Americana and other segment, DirecTv reported a reduction of 146,000 subscribers in Q3-2014 to 6.709 million as compared to an increment of 172,000 subscribers and a base of 6.082 million in Q3-2013. During 9M-2014, the company added 512,000 subscribers as compared to the 792,000 subscribers added in 9M-2013. Subscriber churn figures for this segment have not been mentioned by the company in its Q3-2014 result.

Financials (Company speak)

DirecTv announced that third quarter 2014 revenues increased 6 percent to $ 8.37 billion, adjusted operating profit before depreciation and amortisation (OPBDA) and adjusted operating profit both increased 5 percent to $ 2.04 billion and $ 1.28 billion, respectively, and adjusted diluted earnings per share increased 4 percent to $ 1.33 compared to last year's third quarter. Adjusted financial results exclude a pre-tax charge of $ 62 million in the third quarter of 2014 resulting from the revaluation of the net monetary assets of the company's subsidiary in Venezuela. Reported OPBDA increased 2 percent to $ 1.98 billion, reported operating profit was relatively unchanged at $ 1.22 billion and reported diluted earnings per share declined to $ 1.21 compared to last year's third quarter.

?Our third quarter financial results continue to demonstrate the strong execution of our operations,? said DirecTv president and CEO Mike White. ?In the US, although competition for subscribers continues to be intense, revenue growth was very solid while operating profit before depreciation and amortisation margin expanded year-over-year for the fifth consecutive quarter, highlighting our commitment to profitably grow our businesses through disciplined subscriber acquisitions and expense management, as well as smart pricing.? White added, ?In Latin America, due to challenging macroeconomic and foreign exchange headwinds, we continue to focus on local currency performance which has allowed us to profitably grow our businesses, as well as begin generating positive cash flow in the region - one of our primary goals for the year.?

Segment financials

US segment 

In the third quarter, DirecTv US revenues increased 5 percent to $ 6.51 billion compared with the third quarter of 2013 primarily due to strong ARPU growth of 4.8 percent. The improvement in ARPU to $ 107.27 was driven by price increases on programming packages, higher advanced receiver service fees, increased ad sales, higher fees for the enhanced warranty program and increased commercial business revenues. These improvements were partially offset by increased promotional offers to existing customers and lower revenue from pay-per-view events. 

Third quarter OPBDA increased 11 percent to $ 1.55 billion and OPBDA margin improved from 22.6 percent to 23.8 percent principally due to higher revenues combined with lower upgrade and retention expenses mostly  related to reduced equipment costs, as well as relatively unchanged subscriber service expense. Also contributing to the margin improvement was slower relative growth in subscriber acquisition costs mainly associated with the decrease in gross additions. Operating profit increased 13 percent to $ 1.11 billion and operating profit margin improved from 16.0 percent to 17.1 percent in the third quarter mainly due to the higher OPBDA and OPBDA margin. 

Sky Brasil

Excluding changes in foreign exchange rates, Sky Brasil's third quarter revenues grew 14 percent versus the prior year period driven by an 8 percent increase in the average number of subscribers and a 5 percent increase in local currency ARPU. The increase in local currency ARPU was principally due to a reduction in credits to existing subscribers. When factoring in changes in foreign exchange rates, Sky Brasil's revenues increased 15 percent to $ 1.01 billion and ARPU improved 6 percent to $ 60 compared to the third quarter of 2013.

Excluding the impact of the favourable ECAD settlement in the third quarter of 2013, Sky Brasil OPBDA increased 8 percent to $ 307 million, while OPBDA margin declined from 32 percent to 30 percent. The decline in OPBDA margin was principally due to increased expenses related to customer service and systems initiatives. Also excluding the impact of the favourable ECAD settlement, operating profit increased 19 percent to $ 118 million and operating profit margin increased from 11.2 percent to 11.6 percent. Operating profit margin improved as the decline in OPBDA margin was more than offset by the impact of relatively unchanged depreciation expense.

Pan Americana and other regions

Excluding changes in foreign exchange rates, third quarter revenues in the PanAmericana and other segment grew 45 percent versus the prior year period driven by a 13 percent increase in the average number of subscribers and a 28 percent increase in local currency ARPU. The increase in local currency ARPU was principally due to price increases and growth in advanced services, partially offset by the higher penetration of lower ARPU mass market subscribers. When factoring in unfavorable changes in foreign exchange rates, most notably in Argentina and Venezuela, revenues increased 3 percent to $ 806 million compared to the third quarter of 2013, while ARPU decreased 8.0 percent to $ 39.64.

Also in the third quarter, adjusted OPBDA in the PanAmericana and other segment increased slightly to $ 208 million while adjusted OPBDA margin declined to 25.8 percent. The decline in adjusted OPBDA margin was primarily driven by higher programming costs in Venezuela and increased subscriber acquisition costs mostly due to inflationary pressure on labor costs. In addition, adjusted operating profit decreased to $ 81 million and adjusted operating profit margin declined to 10.0 percent mainly due to the impact of higher depreciation and amortization resulting from leased equipment and infrastructure capital expenditures made over the last year. Reported OPBDA and reported operating profit decreased to $ 146 million and $ 19 million, respectively.

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