DIRECTV 2011 Annual Report Download - page 44

DIRECTV
costs for our existing subscribers or increased programming costs may adversely in turn spend less on our services. If our ARPU decreases or does not increase
affect our financial performance or cause us to increase our subscription rates, commensurate with increases in programming or other costs, our margins could
which could increase churn. Churn may also increase due to factors beyond our become compressed and the long term value of a customer would then decrease.
control, including churn by subscribers who are unable to pay their monthly The weak economy may affect our net subscriber additions and reduce subscriber
subscription fees, a slowing economy, significant signal theft, consumer fraud, a spending and, if these economic conditions continue or deteriorate, subscriber
maturing subscriber base and competitive offers. Any of the risks described in this growth could decline and churn could increase which would have a material adverse
Annual Report that could potentially have a material adverse impact on our costs or effect on our earnings and financial performance.
service quality or that could result in higher prices for our subscribers could cause DIRECTV Latin America is subject to various additional risks associated with
an increase in churn and consequently have a material adverse effect on our doing business internationally, which include political instability, economic
earnings and financial performance. instability, and foreign currency exchange rate volatility.
Our subscriber acquisition costs could materially increase. All of DIRECTV Latin America’s operating companies are located outside the
We incur costs for subscribers acquired by us and through third parties. These continental United States. DIRECTV Latin America operates and has subscribers
costs are known as subscriber acquisition costs. For instance, we provide installation located throughout Latin America and the Caribbean, which makes it vulnerable to
incentives to our retailers to offer standard professional installation as part of the risks of conducting business in foreign markets, including:
subscriber’s purchase or lease of a DIRECTV System. Our subscriber acquisition • difficulties and costs associated with complying with a wide variety of
costs may materially increase if we offer more costly advanced equipment or complex laws, treaties and regulations;
services, including connecting our receivers to the customers’ broadband service, • unexpected changes in political or regulatory environments;
continue or expand current sales promotion activities or introduce more aggressive • earnings and cash flows that may be subject to tax withholding requirements
promotions. Any material increase in subscriber acquisition costs from current levels or the imposition of tariffs, exchange controls or other restrictions;
would negatively impact our earnings and could materially adversely affect our
financial performance. • difficulties and costs associated with the repatriation of cash from foreign
countries to the United States;
Results are impacted by the effect of, and changes in, economic conditions and • political and economic instability;
weakening economic conditions may reduce subscriber spending and our rate • import and export restrictions and other trade barriers;
of growth of subscriber additions and may increase subscriber churn.
• difficulties in maintaining overseas subsidiaries and international operations;
Our business may be affected by factors that are beyond our control, such as
downturns in economic activity, or in the MVPD industry. Factors such as interest • difficulties in obtaining approval for significant transactions;
rates and the health of the housing market may impact our business. A substantial • government takeover or nationalization of business; and
portion of our revenues comes from residential customers whose spending patterns • government mandated price controls.
may be affected by prevailing economic conditions. Our market share in multiple In the past, the countries that constitute some of DIRECTV Latin America’s
dwelling units such as apartment buildings is lower than that of many of our largest markets, including Brazil, Argentina, Colombia and Venezuela have
competitors. If unemployment and foreclosures of single family residences increase, experienced economic crises, characterized by exchange rate instability, high
our earnings and financial performance could be negatively affected more than inflation, high interest rates, economic contraction, a reduction or cessation of
those of our competitors. In addition, if our customers seek alternative means to international capital flows, a reduction of liquidity in the banking sector and high
obtain video entertainment, they may choose to purchase fewer services from us. unemployment. These economic conditions have often been related to political
Due to the economic and competitive environment, we may need to spend more, instability. If these economic conditions recur, they could substantially reduce the
or we may provide greater discounts or credits, to acquire and retain customers who
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