DIRECTV 2002 Annual Report Download - page 51

HUGHES ELECTRONICS CORPORATION
Latin America. Revenues for the Latin America DIRECTV businesses decreased 6% to
$680 million in 2002 from $727 million in 2001. The change in revenues resulted from the devaluation
of several foreign currencies, the most significant of which was in Argentina, and lower 2002
subscribers, partially offset by $55 million of revenues generated from the 2002 World Cup.
Subscribers declined slightly to about 1.58 million as of December 31, 2002 from about 1.61 million as
of December 31, 2001. Due to the economic conditions in Latin America, DLA lost approximately
28,000 net subscribers in 2002, compared to 305,000 net new subscribers additions in 2001. During
2002 and 2001, ARPU for DLA was about $35 and $43 per month, respectively, of which
approximately $27 and $34 was generated from monthly programming subscriptions, respectively, with
the remainder derived from fees associated with leased equipment. The decrease in ARPU was
primarily the result of the devaluation of the Argentinean, Brazilian and Venezuelan currencies against
the U.S. dollar.
EBITDA was a negative $202 million in 2002 compared to negative EDITDA of $132 million in
2001. The change in EBITDA was due to the decreased revenues discussed above, the $80 million
loss from the 2002 World Cup and the consolidation of GEA beginning in May of 2001, partially offset
by lower operating expenses resulting from cost saving initiatives including a reduction in advertising
and promotion costs, and renegotiated programming contracts. The Latin America DIRECTV
businesses incurred an operating loss of $415 million in 2002 compared to an operating loss of
$331 million in 2001. The increased operating loss resulted from the decline in EBITDA and higher
depreciation expense of $44 million resulting from the addition of property, partially offset by a
decrease in amortization expense of $30 million resulting from the discontinuation of goodwill
amortization expense in accordance with SFAS No. 142.
DIRECTV Broadband. Revenues increased $45 million to $72 million for 2002 compared to
$27 million for 2001. The increased revenues were primarily due to a larger subscriber base in 2002
and a full year of revenues in 2002 compared with 2001, which only includes revenues from the date of
DIRECTV Broadband’s acquisition in April 2001. DIRECTV Broadband added about 60,600 net new
subscribers for 2002 compared to 26,500 net new subscribers added from the date of its acquisition in
2001. As of December 31, 2002, DIRECTV Broadband had about 151,600 residential broadband
subscribers in the United States compared with about 91,000 subscribers as of December 31, 2001.
EBITDA was a negative $201 million for 2002 compared to a negative $106 million for 2001. The
operating loss was $248 million for 2002 and $143 million for 2001. The increase in negative EBITDA
and operating loss was due to the $92.8 million charge recorded for the costs associated with the
shutdown of operations. For further discussion of the DIRECTV Broadband shutdown, see “Liquidity
and Capital Resources—Acquisitions and Divestitures” below.
Satellite Services Segment
Revenues for the Satellite Services segment in 2002 decreased $57.8 million to $812.3 million
from $870.1 million in 2001. The decrease was primarily due to a decline in outright sales and sales-
type lease revenue that amounted to $19.6 million for 2002 compared to $67.9 million for 2001.
Revenues from operating leases of transponders, satellite services and other were 97.6% of total 2002
revenues and decreased to $792.7 million from $802.2 million in 2001. Generally, revenues from
outright sales and sales-type lease agreements, equal to the net present value of the future minimum
lease payments, are recognized at service commencement. Interest income from sales-type leases is
recognized over the lease term. Revenues from operating leases are recognized monthly on a straight-
line basis over the lease term.
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