The DIRECTV Group Announces Third Quarter 2007 Results

Business Wire, Nov 7, 2007

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In the quarter, DIRECTV U.S. revenues increased 14% to $3.89 billion due to strong ARPU growth and the larger subscriber base. ARPU of $78.79 increased 8.3% principally due to programming package price increases, higher HD and DVR equipment, service and lease fees, as well as one additional week of NFL Sunday Ticket([R]) revenues in the third quarter of 2007 compared with the same period last year.

The third quarter 2007 operating profit before depreciation and amortization increased 11% to $916 million primarily due to the gross profit on the higher revenues. This growth was partially offset by higher costs for the increased number of new and existing customers adding HD and DVR services, as well as converting to the newer MPEG-4 HD equipment. Operating profit in the quarter declined 10% to $538 million compared to the same period last year mostly due to increased depreciation expense associated with the capitalization of set-top boxes under the lease program which began in March of 2006.

DIRECTV Latin America Segment

In January 2007, The DIRECTV Group purchased Darlene's 14% ownership in DIRECTV Latin America, LLC, for $325 million in cash. As a result, The DIRECTV Group now owns approximately 74% of Sky Brazil, 41% of Sky Mexico and 100% 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 DIRECTV Latin America, had approximately 1.54 million subscribers as of September 30, 2007.

Third Quarter Review

In the third quarter of 2007, DIRECTV Latin America had a nearly fourfold increase in net subscriber additions to 161,000 primarily due to subscriber growth in Brazil, Argentina, Colombia and Venezuela. Also contributing to the net subscriber increase was a decline in aggregate churn to 1.41% in the current quarter primarily due to improved performance in Brazil and Venezuela. The total number of DIRECTV subscribers in Latin America as of September 30, 2007 increased 17% to 3.09 million compared to 2.63 million as of September 30, 2006.

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Revenues for DIRECTV Latin America increased 67% to $442 million in the quarter principally due to the Sky Brazil merger including significantly higher ARPU and favorable exchange rates, as well as continued subscriber and ARPU growth at PanAmericana. Excluding a $61 million pre-tax gain in the third quarter of 2006 related to the DIRECTV Brazil and Sky Brazil merger, DIRECTV Latin America's third quarter 2007 operating profit before depreciation and amortization of $105 million was over three times greater than last year's results primarily due to the merger benefits and the gross profit generated from the higher revenues throughout the region. In addition, DIRECTV Latin America's operating profit of $46 million was impacted by higher depreciation and amortization expense primarily related to the tangible and intangible assets recorded as part of the Sky Brazil and Darlene transactions.