DIRECTV Group, Inc. (DTV)

NetscribeMedia (< 20) Submitted: 6/05/07 6:09 AM : Start Price: $23.24 DTV Score: -38.79

U.S. operations account for major portion of revenues that have grown by 11% in the first quarter to more than $3.5 billion. The large subscriber base primarily drives the growth with the average revenue per user increasing 5.2% to $73.40. Latin American operations form less than 10% of the revenues and have huge potential to grow in the future. Their subscriber base has increased more than 42% to 88,000 due to growth in Brazil and Columbia. The balance sheet of the company looks healthy with excellent cash position of more than $2.5 billion along with the improvement of the free cash flow has embarked upon a share buyback program.





A new satellite DIRECTV 10 would be launched in the near future and would greatly increase the HD capacity. Along with DIRECTV 11, which was delayed due to sea launch problems would result in more than 150 national channels and 1,500 local channels. New initiatives for VOD service would see the launch of DirectTV On-Demand currently in its beta phase and has thousands of titles available made possible through broadband connection.





Over the years it has taken steps to rectify the mistake of including customers with poor credit quality. However it has a big problem due to high customer retention cost that is hurting margins. Up-gradation cost continues to be high as the result of change in hardware and other leased equipment. Quality and efficiency remains one of the key priorities for which it had made investments in both people and call centers that have driven the customer services cost high. DirectTV looks competitively well positioned and its bundling strategy has paid of well. However with the industry maturing, the revenues continue to decelerate and high churn rates along with arising cost makes life difficult for DIRECTV and is better to avoid for the time being.

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