DIRECTV 2009 Annual Report Download - page 10

GROWING RAPIDLY IN LATIN AMERICA
Our strength in the U.S. market is only one part of the DIRECTV
picture. We have a tremendous business in Latin America, with
incredible upside. To put the opportunity in perspective consider
this: Right now, in Brazil – Latin America’s fastest growing economy
– pay TV penetration is 12%. Across all of Latin America it’s
only about 25%. Compare that to the U.S. which is 90%. With
the relative strength of Latin America’s economies and the mass
migration of so many Latin American families into the middle
class, it’s entirely reasonable to think that pay TV penetration could
double in this decade. It’s a great situation when both the pie itself
is getting bigger – and so is our slice.
2009 showed the velocity with which we’re penetrating this
promising market:
n DIRECTV Latin America (DTVLA) posted full year gross additions
of 1.58 million – that’s a record, up 13% over 2008.
n The combination of higher gross additions and lower churn drove
an 11% increase in net additions – bringing our total DTVLA
subscriber base at year’s end to 4.6 million. Add in Sky Mexico, and
DTVLA has over 6.5 million subscribers throughout the region.
n And with this strong subscriber growth, revenues grew 21% to
$2.9 billion.
What’s behind the success of our Latin America strategy?
To a large degree, it’s the same formula that we have in the U.S:
Deliver absolutely the best television experience through leadership
in content, technology and service. Because our businesses work
so closely together, we are able to seamlessly transition our U.S.
technology and expertise to Latin America. Case in point: DTVLA
was able to take advantage of our early HD and DVR leadership in
the U.S. to launch those services ahead of the competition in Latin
America with superior set-top boxes offering more features at a
lower cost.
In Brazil, we’re offering nearly 30 channels in HD, three times
more than the competition. We launched our HD offering in mid-
2009, and we’re already reaching double-digit penetration levels.
In the rest of the region, we’ve built a substantial leadership position
in DVRs, and we’re now seeing over 30% of new subscribers sign
up for these services.
In addition to superior technology, we invested in understanding
the unique needs of the Latin American consumer. We didn’t
assume that the preferences driving consumer behavior in the
U.S. work the same way everywhere else. The middle market
in Latin America remains disproportionately a cash economy.
We’ve adjusted to that, developing a portfolio of pre-paid service
packages as well as lower-priced post-paid plans to allow
DTVLA to provide pay TV in ways that work for Latin America’s
emerging markets.
We’re also offering Latin American consumers the mix
of local and international content we know they’re looking
for – exclusive sports programming like La Liga Espanola
(the Spanish soccer league) and the English Premiere League,
which we carry live and in HD. Finally, we have the best
coverage of FIFA’s 2010 World Cup: Not only will DTVLA be
the only provider to broadcast every game in HD, we’re
also producing six hours a day of original content that will
greatly enhance the viewing experience.
As part of our corporate strategic review, we’ll look for ways
to leverage our core competencies in Latin America to continue
driving strong growth across the region, while selectively
assessing the opportunities we have outside of Latin America.
WILL TO WIN
With our strong base in the U.S. market and ground-floor
growth in Latin America, it’s not surprising that in 2009
DIRECTV became the world’s largest pay TV provider.
But it’s what we’re doing to retain our #1 status – and
build on it – that demonstrates DIRECTV’s will to win. The
foundation for our success starts with our people who thrive
in a performance culture that is punctuated by a passion
for leadership, innovation and executional excellence.
Looking ahead, we see several key catalysts for the kind
of continued growth that will create sustained shareholder
value. We’re going to keep growing our core businesses in the
U.S. and Latin America by continuing to deliver compelling
and distinctive content, technological innovation, and an iron-
clad bond with our customers. We will also keep our heads
up, alert to opportunities where we can bring DIRECTV to
new audiences and new markets. In addition to the recently
announced $3.5 billion share repurchase program, we’re
planning to communicate a more comprehensive “return of
capital” strategy later this year that keeps our shareholders
invested in our success for years to come.
From everything I’ve seen since I’ve come onboard,
we have the assets, talent and balance sheet to continue
delivering outstanding growth in our revenues, profits and
cash flow. I would also like to take this opportunity to thank
our Chairman John Malone for his tremendous support
and strategic insights, while also acknowledging that our
future success is greatly bolstered by the guidance and
leadership of our entire Board of Directors. I look forward to
working with our Board and every member of the DIRECTV
team to ensure that we continue to make DIRECTV the
world’s best video experience.
Michael D. White
President and Chief Executive Officer
8 DIRECTV
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