In 2004, DirecTV
Latin America was in bankruptcy. Today, following a series of mergers and
reorganization, the company is among DirecTV Group's shining stars.
DirecTV Latin
America owns 74% of Sky Brazil, 41% of Sky Mexico and 100% of PanAmericana,
which covers most of the remaining countries in the region. All told, the three
units count 6 million customers, according to DirecTV Latin America CEO Bruce Churchill.
Many
of the challenges and advantages the Latin American unit faces are similar to
those DirecTV tackles in the U.S., Churchill said, but the
scale is different. Cable is DirecTV Latin America's largest competitor and,
like stateside cable operators and telcos, many of the largest Latin players
offer triple-play bundles. DirecTV Latin America is in talks with several
regional telephone companies to partner as DirecTV has done with AT&T,
Verizon Communications and Qwest Communications International in the U.S. But no deals are yet in
place.
DirecTV
Latin America has been able to create some cost efficiencies with programming
and equipment by leveraging the scale of its U.S. counterpart, Churchill said.
The boxes in Latin America are the same boxes deployed stateside, for instance.
The
markets are much more underdeveloped though. Pay-TV penetration in the U.S. is well over 80%, but only
about 25% of Latin American homes subscribe to some type of pay-TV service. Moreover,
while more than 60% of DirecTV's new U.S. customers are subscribing to
advanced services such as digital video recorders and HDTV, the rates are significantly
lower south of the border.
Churchill
figures about 10% of DirecTV Latin America's customers subscribe to an advanced
service and "we probably have the highest penetration of all our competitors.
Many don't offer advanced services at all," he said. "There is plenty of upside
to be had in Latin America," Churchill said. "Will it ever reach U.S. rates? Probably not. But 50%
penetration is not out of the realm."
Similar
to its U.S. counterpart, DirecTV Latin
America is well-positioned with high-end consumers. But the company is trying
to attract more middle-market homes. DirecTV Latin America recently launched a
pre-pay service option with consumers throughout its footprint and is getting
good traction.
"Ninety
percent of all phones are paid for with pre-paid cards in South America," Churchill said. "So this
concept is already well-received. Customers buy their equipment and then buy
the programming ahead of time. We have some customers buying two-weeks of
service at a time. This is definitely a cash society and the pre-paid option is
popular. Already in Venezuela, about 300,000 of our
800,000 customers there are pre-paid customers."
Regardless of the differences between the two
operations in terms of size, market penetration and maturation, the goals of
both the U.S. and Latin American operations are the same. "We want to provide the
best TV experience, hands down," Churchill said. "Every region is different,
but the goal is the same."
