LatAm_latam 09/07/2014 15:52 Page 1
AdvancedTelevision
LatAm
Market Briefing 2014
LatAm ‘jewel’ of AT&T/DirecTV deal
T&T’s proposed acquisition of
DirecTV will give the US telco
a foothold in Latin America, a
region that offers major
growth potential in pay-TV and mobile
broadband. DirecTV, with its 18 million
subscribers in Central and South
America, is the biggest pay TV provider
in Latin America where the market for
such services is already growing at a
much faster rate than the mature US
market.
In discussing the benefits of the proposed
deal, AT&T noted that DirectTV’s Latin
American business was the leading pay TV
provider in the region. “DirectTV's satellite
platform’s broad reach remains advantaged
when compared with cable and telco in Latin
America. Latin America has an
underpenetrated pay TV market (about 40%
of households subscribe to pay TV) and a
growing middle class, and is DirectTV 's
fastest growing customer segment,” it noted.
Demonstrating the importance of Latin
America to the logic of the deal, AT&T has
parted with its $5 billion stake in billionaire
Carlos Slim's América Móvil (above) to
smooth the regulatory process and win
DirecTV's business in the region. DirecTV's
A
Latin American operation account for 95% of
its subscriber growth, but just 20% of its
revenues. DirecTV expects revenue to be in
the $8 billion to $9 billion range, down from
a prior forecast of $10 billion by 2016.
DirecTV owns about 93% of Sky Brasil, the
largest satellite provider in the region's
biggest economy. It has 41% of Sky Mexico,
controlled by Mexico's Televisa and serving
Mexico, Central America and the Dominican
Republic. It owns 100% of PanAmericana,
which offers satellite TV services under the
DirecTV brand in countries including
Venezuela, Argentina, Chile, Colombia and
Puerto Rico.
In December 2013, DirecTV said it had an
annual compound growth rate of 22% in
Argentina, 16% in Venezuela and about 32%
in the other countries served by
PanAmericana, such as Colombia and Chile.
In February 2014, MoffettNathanson
Research analyst Craig Moffett said higher
churn, lower revenue per subscriber and
higher subscriber acquisition costs in the first
quarter were troubling DirecTV's Latin
American business. Notwithstanding that, he
said much of the decline reflected currency
shifts rather than deteriorating fundamentals
noting that, in Latin America, penetration was
still low, incomes were rising and DirecTV's
brand was “very, very strong”.
“DirecTV has been very conservative in
their LatAm approach. There is an
opportunity for a new owner to exploit more
growth, particularly in wireless broadband
where they have seen initial success,” said
BTIG analyst Walt Piecyk.