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Hughes Loss Grows Despite Revenue Rise

A $65-million charge widens the gap, but the DirecTV unit gets a boost from a deal to broadcast NFL games.

October 15, 2003|From Reuters

Hughes Electronics Corp. on Tuesday reported a wider quarterly loss but said revenue rose as its exclusive rights to broadcast out-of-market National Football League games propelled growth at its satellite television service DirecTV.

The El Segundo-based company reported a net loss of $23 million, compared with a net loss of $14 million last year.

The wider loss reflected a $65-million accounting charge taken to assume the liabilities of DirecTV Latin America units in Costa Rica and Venezuela. A year earlier, the company had a one-time $159-million pretax gain on the sale of 8.8 million shares of Thomson Multimedia.

Consolidated revenue for the third quarter rose 17% to $2.57 billion, topping Wall Street estimates, and was up from $2.21 billion the previous year. Analysts on average had expected the company to report sales of $2.51 billion, with the high end of that range at $2.54 billion.

Cash flow increased 33% to $359 million, up from $270 million a year earlier.

"DirecTV saw a tremendous increase in demand," said Hughes President and Chief Executive Jack Shaw, who said satellite was making inroads against cable television. "I see this as a change in momentum from cable to satellite."

Hughes' DirecTV unit added a net 326,000 subscribers to its satellite television service, up 58% from last year.

In addition to its NFL Sunday Ticket package, Hughes attributed the quickening pace of subscriber growth to higher demand for local channels and more subscribers with multiple set-top boxes.

"I think what surprised investors is their continued strength in customer acquisition," said Craig Moffett, cable analyst with Bernstein Research. "A lot of this has to do with the fact that the NFL Sunday Ticket package starts in the third quarter."

Last month, Hughes raised its 2003 revenue guidance for its DirectTV unit, which operates the largest U.S. satellite television service, to $7.6 billion from $7.5 billion. It also increased guidance for subscriber growth to 1.05 million from 900,000.

Hughes, the satellite communications unit of General Motors Corp., is slated to be taken over by Rupert Murdoch's News Corp. in a $6.6-billion transaction that could be completed this year pending regulatory approval.

Last week the Federal Communications Commission notified Hughes that it needed more time and information to review the transaction, but Shaw said he didn't expect the additional scrutiny to delay the close of the process.

"We consider that to be standard process," Shaw said. "We are still very hopeful we can complete the transaction and close it by the end of the year."

Shaw said he expected DirectTV Latin America to emerge from Chapter 11 bankruptcy proceedings about the same time as the close of the News Corp. transaction.

DirecTV is in a fierce court battle with rival EchoStar Communications Corp. to purchase three satellites from ailing satellite maker Loral Space & Communications Ltd. Lawyers for EchoStar filed a motion Friday to block the sale, but DirecTV President Roxanne Austin said in a conference call that she expected to prevail in the dispute.

Shares of Hughes fell 8 cents to $15.46 on the New York Stock Exchange.

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