By Liana B. Baker
(Reuters) - Satellite TV provider DirecTV
Even though DirecTV is the largest U.S. satellite provider with more than 20 million subscribers, investors tend to zero in on the subscriber trends in Latin America, where the company has until now enjoyed rapid growth by tapping into an expanding middle class, particularly in Brazil. It also operates in Colombia, Argentina, Venezuela, Chile and Ecuador.
In Latin America, DirecTV added just 165,000 subscribers, while research firm StreetAccount was looking for 431,900. Churn, or the rate of cancellations, soared 3.1 percent compared with 1.8 percent a year earlier. It was in stark contrast to the first quarter when DirecTV added nearly 583,000 subscribers there.
"It is increasingly Latin America we need to worry about. Growth in the subscriber base is unmistakably slowing," said Moffett Research analyst Craig Moffett said.
Chief Executive Mike White blamed the performance on a slowing economy in Brazil and increased competition.
DirecTV said in June that subscriber numbers for Sky Brasil, one of its fastest growing units, had been overstated. The total as of March 31 was overstated by about 200,000, while the total as of December 31 was overstated by 100,000, it said.
Bruce Churchill, the president of DirecTV's Latam business assured investors on Thursday that he expects the churn rate in the middle market of Brazil to improve as the company unveils some new initiatives.
He added that DirecTV's longterm view on how much money it can make in the region will not change.
OPEN TO DISH DEAL?
Analysts view a merger of DirecTV and its smaller rival Dish as inevitable as programming costs escalate and the pay TV industry matures. Dish Network
When asked about a Dish merger, White said "further industry consolidation does make sense" but said that Dish's strategy is different than DirecTV's while Dish's Chairman Charlie Ergen focuses on the wireless business.
"It always takes two to dance," White said, adding that Dish is "committed on other ideas and strategy, at least for the moment...But you never say never and we'll be opportunistic when the right moment arrives."
NFL TALKS CONTINUE
DirecTV, a longtime critic of escalating sports programming costs, sounded upbeat on its chances to renew an expensive contract with the National Football League when it expires in 2015.
The company pays a reported $1 billion a year to the NFL, in a deal that allows subscribers to watch football games outside of their local markets on game day. The exclusive package is an important tool for DirecTV to attract new subscribers.
White, the CEO, said that DirecTV is having "constructive discussions" with the NFL and said he is "optimistic that we're great partners together and that DirecTV Sunday ticket will stay with us for the long haul."
Analysts on average expected U.S. DirecTV to lose a net 69,500 U.S. subscribers in the quarter, according to research firm StreetAccount, but the losses totaled 84,000.
Second-quarter profit was $660 million, or $1.18 per share, down from $711 billion, or $1.09 share, a year earlier. Analysts' average forecast was $1.33 per share, according to Thomson Reuters I/B/E/S.
Revenue rose 6 percent to $7.7 billion, compared with an average estimate of $7.75 billion.
DirecTV shares fell 2 percent to $60.
(Reporting by Liana B. Baker; Editing by John Wallace, Bernard Orr and Andrew Hay)