DirecTV Weighing Options for Wireless, Fixed-Line Broadband Services

DirecTV last fall tested fixed line LTE with Verizon through a small number of homes in Pennsylvania using a device that attached to a satellite dish to receive a 4G signal from a cellular tower, company officials have said. The signal is sent to the home over the same cable used for satellite feeds. There have been rumors DirecTV was planning such a package for introduction at year-end, but White said it was “too soon to say” which path the satellite service would take because the company is “in the middle of putting something together for next year.” DirecTV also remains open to working with cable operators on a broadband service, he said.

"Fixed broadband to the home has some scale and it’s something that we continue to think about,” White said: “We can stream today from our head ends, but we can’t market it until we have the rights” and each movie studio and programmer “has a slightly different strategy.” While technology for wireless services is available, it’s the rights agreements governing content distribution that need to be finalized, White said.

Meanwhile, DirecTV Latin America (DLA) postponed plans for bundling LTE service in Brazil after running into delays getting needed regulatory approvals, White said. A test bundling LTE wireless with its satellite programming package in Buenos Aires had been scheduled for the current quarter using multichannel multipoint distribution service (MMDS) spectrum DLA acquired.

DirecTV will “greatly enhance” its TV Anywhere service in the coming month to allow streaming of live program and on-demand content to mobile devices, company officials said. DirecTV also is planning to launch in December its HD30 home media center, a set-top box DVR/satellite receiver that doubles storage capacity to one terabyte and contains five tuners for the recording five programs simultaneously.

More than 80 percent of DirecTV’s 957,000 gross subscriber additions buy advanced services, with 65 percent choosing an HD/DVR package, up from 50 percent a year ago, Chief Financial Officer Patrick Doyle said. About 40 percent of gross subscribers chose the whole-home DVR package, up from 30 percent a year earlier.

Meanwhile, DirecTV’s NFL Sunday Ticket promotion offering the package free on a two-year contract drove net subscriber additions to 327,000, the highest quarterly gain in seven years, vs. analyst estimates for 158,000. The promotion brought in 1.1 million new NFL Sunday Ticket subscriptions against 300,000 in a standard year without a free offer. Among the 300,000, renewal rates were typically 30 percent and DirecTV expects it will be higher for the new package, White said. The NFL Sunday Ticket has had a 75 percent increase in viewership with standard satellite receivers and 40 percent for mobile devices, he said. Prior to the promotion, NFL Sunday Ticket subscription totals had been stagnant at around two million, White said.

"While the effect of this will wane in Q4, there should be an increased benefit from DTV’s bundling initiatives with FiOS and U-verse, as well as a positive impact from new features being launched,” Evercore Co. analyst Bryan Kraft said in a research note. “As we have highlighted in the past, features have historically been a significant driver of improving subscriber trends for DirecTV."

DirecTV also “accelerated” deployment of DirecTV-14 and DirecTV-15 satellites to 2014 after encountering “technical issues” with DirecTV-10, which is operating on a back-up propulsion system, Doyle said. If DirecTV-10 fails, the satellite operator has a “back-up plan,” said Doyle, who didn’t disclose details. DirecTV-10, a Boeing 702 satellite, was deployed in July 2007 and is located at 102.7 degrees west.

DirecTV’s Q3 net income improved to $516 million, from $479 million a year earlier, as revenue jumped to $6.8 billion from $6 billion. The increase in net income was tempered by an increase in long term debt to $13.4 billion from $10.4 billion, resulting in a rise in interest expense to $194 million from $147 million. The gains came despite DirecTV’s cash paid for leased equipment, subscriber acquisitions and retention rising to $313 million from $271 million a year ago, while cost for property, equipment and satellites increased to $659 million from $395 million. Free cash flow decreased during Q3 to $235 million from $665 million. Monthly programming cost per subscriber rose 9.1 percent in Q3, said Credit Suisse analyst Stefan Anninger, who had forecast an 8.5 percent rise. DirecTV ended Q3 with 19.76 million subscribers, up from 18.93 million a year earlier.