Latin America is an important market for DirecTV (
), constituting close to 25% of its total value by our estimates.
In order maintain its competitive position, DirecTV is planning to
increase its satellite capacity in the region along with focusing
on certain key markets such as Brazil, Venezuela, Columbia and
DirecTV intends to add 3 new satellites over the next few years
and could consider acquiring local player GVT in order to offer
bundled services. The increased satellite capacity will help
DirecTV provide HD services in Brazil and other countries, which
will be additive to the company's revenues and profits. Brazil will
continue to remain one of the key markets for DirecTV. The region
has 60 million households and pay-TV penetration is still low at
less than 30%.
See our complete analysis for DirecTV
How Has DirecTV's Latin American Business Done Recently?
In Q4 2012, DirecTV's gross additions in Latin America stood at
close to 1.18 million while net subscriber additions amounted to
658,000. Revenues grew by 20% despite higher growth in subscribers
due to negative exchange rate effects. 2012 was a stellar year for
DirecTV in terms of Latin American expansion, and the company
believes that its good run will continue in 2013 as well. The Latin
American market is still underpenetrated and DirecTV is witnessing
great success from its prepaid and middle market products. Almost
37% of DirecTV's Latin American subscribers are middle market
customers and 54% of gross additions in the Pan American region
(excludes Brazil and Mexico) came from prepaid packages. The Latin
American customers are more value-conscious and so these packages
have been successful. The company expects its revenues from the
region to grow by roughly 20% in 2013. However, ARPU may come down
due to increasing penetration of middle market packages which are
We currently forecast DirecTV's Latin American subscriber base
to reach close to 20 million by the end of our forecast period.
This is based on our expectation that DirecTV will maintain its
lead and continue to grow its base at a high rate. However, if the
churn increases and other competitors start offering competitive
pay-TV packages or landline bundles, this growth could taper down.
In an event where DirecTV can reach only 15 million subscribers
instead of 20 million by the end of our forecast period, there can
be downside of about 10% to our price estimate.
Our price estimate for DirecTV stands at $58
, implying a premium of about 20% to the market price.
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