DirecTV lost about 500,000 subscribers in the third quarter, leaving it with a total of 13.3 million, according to a report by credit rating agency Fitch Ratings.
DirecTV was spun off by AT&T last year and no longer publicly reports its subscriber numbers.
Cord-cutting has accelerated recently, but Fitch indicated that DirecTV loss rates "have substantially improved over the last two years, driven by lower churn."
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Fitch added that successful execution of the deployment of the DirecTV Stream product could help mitigate losses in the company's traditional satellite-based product.
"The next generation DirecTV Stream product delivers video over a software-based video architecture and is a more robust linear TV offering than its prior iterations of over the top (OTT) direct-to- consumer products. For the next generation product, DirecTV has reported high satisfaction rates and strong attach rates with broadband services," Fitch said.
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Fitch affirmed its rating of DirecTV long-term debt at BB+. It also affirmed the BBB/RR1 ratings of DirecTV Financing’s first lien revolver and terms loan, as well as its senior secured first lien notes.
But Fitch said that DirecTV’s revenues are expected to decline by high single digits in 2022 and 2023 due to declines in DirecTV subscribers and U-Verse subscribers, partly offset by increased penetration of DirecTV Stream subscribers and higher ARPUs across all three platforms.
EBITDA margins are expected to be in the low-to-mid 20% range as most content costs decrease with subscriber declines, and as the company shifts to the lower cost DirecTV Stream product and realizes cost efficiencies.
Free cash flow(after distributions) is expected to be approximately $2 billion annually over the 2022-2025 range, with capex intensity in the low single digits. ■
