DIRECTV 2002 Annual Report Download - page 22

HUGHES ELECTRONICS CORPORATION
operations in these key markets. Hughes currently owns (directly or through DLA) a controlling interest
in local operating companies in Mexico, Brazil, Argentina and Colombia and is negotiating for control of
the LOC’s in Venezuela and Puerto Rico.
LOC’s are primarily responsible for sales and marketing efforts that are based on and aimed at
local market conditions and characteristics. DLA has established a comprehensive sales and
distribution network designed to acquire new subscribers and to provide efficient installation and
customer service. The sales force conducts a range of sales activities, including direct sales, retail
sales, rural sales and telemarketing.
DLA’s marketing management team establishes pan-regional marketing policies, conducts
research and provides strategic brand direction and coordinates advertising. DLA believes this enables
the company to more effectively develop initiatives for addressing issues that are common to all
markets and ensure consistent, high quality branding of DIRECTV throughout the region. DLA
encourages its local marketing teams to apply their local expertise to develop targeted campaigns that
effectively address target subscribers in each country.
Satellites. DLA provides the DIRECTV service to its customers via the Galaxy IIIC satellite that
was launched in June 2002 and was placed in service in September 2002. DLA leases the transponder
capacity on Galaxy IIIC from PanAmSat (see—“PanAmSat” below).
Competition. In each of DLA’s markets, DLA competes primarily with other providers of pay
television, who distribute their programming via cable, multi-channel multipoint distribution systems
(“MMDS”) or satellite. DLA competes primarily on the basis of programming, price, quality, customer
support, brand recognition and reputation; DLA believes that it compares favorably to its competitors in
these areas. DLA’s principal direct-to-home satellite competitors in the major markets in which it
operates are the operating platforms of Sky Global Networks, Inc. DLA competes with Sky Latin
America primarily in Brazil, Mexico, Chile and Colombia. Affiliates of Sky Latin America have exclusive
agreements with the largest local broadcast companies in each of Brazil and Mexico, which currently
prevents DLA from gaining access to some important local programming and could impair DLA’s ability
to attract and retain subscribers in those markets.
Hughes Network Systems
Overview. HNS is a leading supplier of broadband satellite networks, services and products with
particular emphasis on providing broadband access. HNS designs, manufactures and installs
advanced networking solutions for businesses worldwide using VSAT’s. HNS has aligned its services
and products into three marketing groups: Broadband Products and Services, Set-top Box Products
and Carrier Services and Products.
Broadband Products and Services. HNS has sold satellite-based broadband products and
services to enterprises since 1987 and to consumers since 1997. HNS is the leading supplier of
satellite-based VSAT private business networks. Since 1987, HNS has had more than 400,000 VSAT’s
shipped to or ordered from a variety of business customers worldwide, including GM, DaimlerChrysler,
Ford, Toyota, Chevron, Texaco, Exxon Mobil, Amoco, Wal-Mart, GTech, Jack In the Box and Wendy’s
International. VSAT’s are typically used by enterprises with a large number of geographically dispersed
locations to provide reliable, scalable and cost effective applications such as credit card verification,
inventory tracking and control and video teleconferencing. More recently, HNS has expanded its
offering to include new services to meet customers’ evolving broadband requirements such as Intranet/
Internet communications, in-store music and streaming media.
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