DIRECTV 2002 Annual Report Download - page 15

HUGHES ELECTRONICS CORPORATION
profitably and have required large cash investments. Hughes’ objective is to implement new
business plans to quickly reduce cash requirements and improve the returns on these
businesses. For example, in January 2003, DIRECTV Latin America announced the
commencement of discussions with certain programmers, suppliers and business associates to
address DLA’s current financial and operational challenges. The objective is to reduce the cash
requirements of the business and to restructure DLA in a way that ensures its long-term
profitability. Other cash conservation measures include the closing of the DIRECTV Broadband
business in the first quarter of 2003 and pursuing a limited growth strategy for the consumer
DIRECWAY business.
•Focus on Long-Term Ownership Structure. As discussed above, Hughes and GM plan to
address and determine the appropriate long-term ownership structure of Hughes in a way that
benefits both GM $1-
2
⁄ 3 and GM Class H shareholders.
Competitive Advantages
Hughes believes that it has several important competitive advantages in the markets in which it
competes. Hughes believes these competitive advantages should enable it to achieve sustainable
market leadership positions and continue its strong revenue and earnings growth. These competitive
advantages include:
•DIRECTV Brand and Service. In the United States, DIRECTV has a leadership position in
the U.S. MVPD market, highlighted by:
•One of the largest MVPD subscriber bases. DIRECTV is the second largest MVPD provider
and the largest Direct Broadcast Satellite (“DBS”) provider in the United States, based on
number of subscribers. As of December 31, 2002, DIRECTV had approximately 11.2 million
subscribers, including subscribers receiving the DIRECTV®service from National Rural
Telecommunications Cooperative (“NRTC”) members and affiliates. Hughes believes that
DIRECTV’s large subscriber base provides it with opportunities to obtain programming on
favorable terms and secure unique and exclusive programming.
•Leading Brand Name. As a result of DIRECTV’s considerable advertising and marketing
efforts since the launch of its services in 1994, DIRECTV has developed a leading brand
name. Results from a recent study commissioned by DIRECTV indicated that over 70% of
consumers in the United States are aware of the DIRECTV satellite television service.
Hughes believes the strength of the DIRECTV brand is an important factor in its ability to
attract new customers. In addition, Hughes believes the DIRECTV brand name enhances its
ability to secure strategic alliances with programmers, distributors and other technology and
service providers.
•Substantial Channel Capacity and Programming Content. DIRECTV currently distributes
approximately 800 digital-quality video and audio channels, of which approximately 270 are
distributed to the 48 contiguous states of the United States and the remainder are regional
and local channels. As a result of its significant channel capacity, Hughes believes DIRECTV
is able to deliver to its customers one of the widest selections of programming available
today in the United States, including exclusive programming such as the NFL SUNDAY
TICKET™. As of December 31, 2002, DIRECTV offered local channels in 51 major
metropolitan markets, which included approximately 72 million, or 67% of U.S. television
households. DIRECTV expects to launch DIRECTV 7S in the fourth quarter of 2003.
Assuming a successful launch of DIRECTV 7S, DIRECTV expects to provide local channel
coverage to approximately 100 markets representing approximately 90 million, or 84%, of
U.S. television households.
5