DIRECTV 2011 Annual Report Download - page 20

Consolidated revenues were up 42 percent to $5.1 billion for the full year,
driven primarily by subscriber growth, price increases, growing demand
for our advanced services and favorable exchange rates, primarily in Brazil.
Post-paid churn remained low throughout the year, while our operating
profits rose by 47 percent to $916 million. In Mexico, despite the 10 percent
decline of the Mexican peso, we saw solid year-over-year gains in both
revenue and profit. Mexico remains a significant contributor to the success
of the DIRECTV Latin America business, though we don’t consolidate Sky
Mexico in our results.
In Latin America, we continued to benefit from the growing population
of young consumers – some 70 percent of the population is under the age
of 40 – entering their high earning years and living in growing economies
not heavily tied to the mature U.S. or European markets. Pay-TV is the
ultimate middle-class product and we remain well positioned to meet
their entertainment needs.
We also began to see a more balanced growth pattern as these young
pay-TV households expand across the region in Mexico and PanAmericana.
For example, Argentina reported a significant increase in new customers
in 2011 and churn in Venezuela and Brazil remains below what we had
expected. Brazil and its thriving middle market once again led the region
with Argentina and Venezuela contributing significantly to the top line,
driving record gains and exceeding our expectations.
We’re particularly pleased with the increasing take rates of advanced
products. In Brazil, for example, advanced product sales increased more than
70 percent compared to last year due to our attractive HD promotional offers.
We now have more than 800,000 HD customers in Brazil.
OPPORTUNITIES FOR GROWTH IN 2012 AND BEYOND
Given everything we now know about the Latin American market – the surging
growth of the young, middle-class consumer, low pay-TV penetration and
economies that are expanding – we continue to be bullish about our growth
potential in Latin America. But we aren’t about to take anything for granted.
We continue to have distinct advantages with our continental footprint, a
premium brand and broad range of unique products and services, which
we will aggressively leverage to gain market share throughout the region
in 2012. In particular, while continuing to expect growth in Venezuela and
Argentina, we’ve become more optimistic about our prospects in Colombia.
With economic conditions improving and the government clamping down
on disreputable operators, we are looking to establish Colombia as the third
major territory in the PanAmericana platform by substantially increasing our
customer base there in 2012.
KEEPING THE MIDDLE MARKET IN MIND
AND SELLING MORE ADVANCED PRODUCTS
In 2012, we will continue to target the middle market consumer with attractive,
value-oriented offers, such as our SKY Fit product in Brazil. The pre-paid product
remains an attractive business for us and has been an important driver of growth
in PanAmericana. With that in mind, we are relaunching our pre-paid service this
year in key markets to take advantage of the strong demand from consumers
who are interested in entry-level packages.
We also plan to expand our leadership in higher income households in 2012 by
selling more advanced products to new and existing customers. In fact, in Brazil
last year, nearly two thirds of our new HD customers were the result of upgrades.
PROGRESS ON INFRASTRUCTURE AND STRATEGIC INITIATIVES
In 2011, we made headway on several important strategic projects that will
support our growth in Latin America in the years ahead. We solidified our
plans for the launch of two satellites in 2014 and 2015 that will significantly
expand our video capacity for PanAmericana, enabling us to deliver more HD
programming. We’re also in the process of expanding our California Broadcast
Center in Long Beach, Calif., a necessary step to support additional channel
capacity across the region.
We are also working on other strategic initiatives to support our business, such
as the expansion of wireless broadband and over-the-top video services.
Our Latin America business
continued its breathtaking growth—
demand re mained vibrant for our
pr odu cts and se rvic es, driving
another year of record-setting
growth acro ss the region.