DIRECTV 2006 Annual Report Download - page 22

THE DIRECTV GROUP, INC.
Restructuring of DTVLA
From March 2003 to January 2007 we initiated and completed a series of restructuring transactions
to strengthen our operating and financial performance, which include:
•Reorganization of DLA LLC. On March 18, 2003, DLA LLC filed a voluntary petition for
reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for
the District of Delaware, and in February 2004 DLA LLC’s Plan of Reorganization was approved
and became effective. As a result of the restructuring and related transactions, DLA LLC
eliminated indebtedness, acquired full ownership of the principal local operating companies that
provided DIRECTV branded services in Latin America and Puerto Rico, and was able to
restructure and renegotiate certain programming and operating contracts to obtain more
favorable terms that would allow us to operate the business more economically. Following the
restructuring, we owned approximately 86% of DLA LLC. The remaining 14% was owned by
Darlene, one of DLA LLC’s other founders.
•Sky Transactions. During 2006, we completed the Sky Transactions, a series of transactions that
were agreed in October 2004 with News Corporation, Grupo Televisa, S.A., or Televisa, Globo
Comunicacoes e Participacoes S.A., or Globo, and Liberty Media International, or Liberty, and
which resulted in the consolidation of the DTH platforms of DIRECTV and SKY in Latin
America into a single platform in each of the major territories served in the region. These
transactions were completed as follows:
• On October 8, 2004, we acquired Sky Multi-Country Partners and certain related entities
from News Corporation, Liberty, Globo and Televisa. Sky Multi-Country Partners had
subscribers in Colombia and Chile, which were later migrated to our PanAmericana platform
in these countries.
• On February 16, 2006, we completed the acquisition of our equity interest in Sky Mexico,
which included the acquisition of a 12% equity interest in Sky Mexico in exchange for the
sale of DIRECTV Mexico subscribers to Sky Mexico, as well as our acquisition of News
Corporation’s and Liberty’s interests in Sky Mexico.
• On August 23, 2006, we completed the merger of our Brazil business, Galaxy Brasil Ltda., or
GLB, with Sky Brazil, as well as our purchase of News Corporation’s and Liberty’s interests
in Sky Brazil.
•Purchase of Darlene Interest in DLA LLC. In January 2007 we purchased Darlene’s 14% interest
in DLA LLC, so that we now own 100% of DLA LLC. As part of the purchase, we resolved all
outstanding disputes with Darlene. See Item 3 ‘‘Legal Proceedings’’ section below.
As a result of these transactions, we own 100% of PanAmericana, 74% of Sky Brazil, and 41% of
Sky Mexico. Globo owns the other 26% of Sky Brazil and Televisa owns the other 59% of Sky Mexico.
The results of PanAmericana and Sky Brazil are consolidated in our results. We account for our 41%
interest in Sky Mexico under the equity method of accounting.
Key Strengths
•High Quality Digital Picture and Sound. Our video and audio programming is 100% digitally
delivered, providing subscribers with digital-quality video and CD-quality sound, as well as
interactive features. We believe that this compares favorably with cable providers in Latin
America, who typically continue to have a large percentage of their subscriber bases receive only
analog services or a combination of analog and digital services.
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