DIRECTV 2009 Annual Report Download - page 37

DIRECTV
performance could be negatively affected more than those of our competitors. In addition, if our
customers seek alternative means to obtain video entertainment, they may choose to purchase fewer
services from us. Due to the economic and competitive environment, we may need to spend more to
acquire and retain customers who in turn spend less on our services. If our average monthly revenue
per subscriber, or ARPU, decreases, our margins could become compressed and the long term value of
a customer would then decrease. The weak economy may affect our net subscriber additions and
reduce subscriber spending and, if these economic conditions continue or deteriorate further, our
subscriber growth could decline and our churn rate could increase which would have a material adverse
effect on our earnings and financial performance.
DTVLA is subject to various additional risks associated with doing business internationally, which
include political instability, economic instability, and foreign currency exchange rate volatility.
All of DTVLA’s operating companies are located outside the continental United States. DTVLA
operates and has subscribers located throughout Latin America and the Caribbean Basin, which makes
it vulnerable to risks of conducting business in foreign markets, including:
• difficulties and costs associated with complying with a wide variety of complex laws, treaties and
regulations;
• unexpected changes in political or regulatory environments;
• longer payment cycles;
• earnings and cash flows that may be subject to tax withholding requirements or the imposition of
tariffs, exchange controls or other restrictions;
• difficulties and costs associated with the repatriation of cash from foreign countries to the
United States;
• political and economic instability;
• import and export restrictions and other trade barriers;
• difficulties in maintaining overseas subsidiaries and international operations;
• difficulties in obtaining approval for significant transactions;
• government takeover or nationalization of business; and
• government mandated price controls.
In the past, the countries that constitute some of DTVLA’s largest markets, including Brazil,
Argentina, Colombia and Venezuela have experienced economic crises, caused by external and internal
factors, and characterized by exchange rate instability, high inflation, high domestic interest rates,
economic contraction, a reduction or cessation of international capital flows, a reduction of liquidity in
the banking sector and high unemployment. These economic conditions have often been related to
political instability, including political violence. If these economic conditions recur, they could
substantially reduce the purchasing power of the population in our markets and materially adversely
affect our business.
Because DTVLA offers premium pay television programming, its business is particularly vulnerable
to economic downturns. DTVLA has experienced, and may in the future experience, decreases or
instability in consumer demand for its programming, as well as subscriber credit problems. DTVLA’s
inability to adjust its business and operations to adequately address these issues could materially
adversely affect its revenues and ability to sustain profitable operations.
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