DIRECTV 2006 Annual Report Download - page 7

Content, technology and service are the
pillars around which we’ve built the
DIRECTV U.S. business and last year we
made major strides in each. In the content
arena, we introduced a compelling array
of original and high defi nition, or HD, pro-
gramming and interactive features, and
we’ll debut even more content this year
particularly in the sports, gaming and
music genres. On the technology front,
we launched three new set-top receivers
that will serve as our foundation for future
growth. We also made signifi cant progress
in building out our HD infrastructure. And
in the service area, we made improve-
ments over the past year, yet we’re still
not where we need to be relative to the
level of excellence in customer service that
we demand for our customers.
Our accomplishments led to a strong
year both from an operational and fi nancial
perspective in 2006 – and we were reward-
ed with a 77 percent increase in our stock
price. DIRECTV U.S. attained a total of
820,000 net new subscribers, due in part
to a reduction in churn, or the percentage
of customers who disconnected their
service each month, from 1.70 percent to
1.60 percent. While we’re encouraged that
we brought churn down from the prior
year, we fell short of our goal and we re-
main highly focused on further reductions
in churn. We also stabilized our cost to
acquire new subscribers, commonly known
as SAC, at $641 per subscriber despite
adding nearly twice as many HD and
DVR (digital video recorder) customers
compared to the prior year.
Refl ecting our unparalleled program-
ming, DIRECTV U.S. average monthly
subscriber revenue, or ARPU, increased
6 percent in 2006 to $73.74. The strong
subscriber growth combined with one
of the highest ARPUs in the industry,
drove revenue growth of 13 percent to
$13.7 billion. More importantly, cash fl ow
before interest and taxes grew 83 percent
to more than $1.4 billion refl ecting the
tremendous potential of our U.S. business.
We also implemented and completed
a $3 billion stock repurchase program,
and recently announced a new $1 billion
repurchase program.
The latter part of 2006 also brought
an agreement between News Corp. and
Liberty Media Corp. to transfer News
Corp.’s approximate 38 percent interest
in DIRECTV to Liberty. We accomplished
a great deal with News Corp. and we look
forward to continued success with Liberty
as our largest shareholder. Following the
anticipated close of the transaction in the
second half of 2007, we expect to continue
our strategy of focusing on higher quality
subscribers that drive profi table growth
and maximize DIRECTV’s value.
With our foundation fi rmly in place,
2007 will be a year of execution at
DIRECTV as we work toward considerable
improvements in our operating perfor-
mance. Our top three priorities are to:
■ Signifi cantly improve the DIRECTV
experience throughout the customer
lifecycle
■ Introduce compelling and distinctive
products and services to increase our
video leadership, and
■ Build on our momentum to continue
improving our operational and fi nancial
results.
A Message to Shareholders
2006 was an important year for The DIRECTV Group. We completed critical initiatives
and made operational improvements that will drive DIRECTV to the next level as the
unrivaled leader in television in the United States. We also made important structural and
operational improvements in Latin America to position those businesses for success.
ANNUAL REPORT 5