DIRECTV Latin America - NASDAQfiles.shareholder.com/downloads/DTV/3660448813x0x160978/7f9625f0... · President, DIRECTV Latin America Closing Remarks Alex Penna General Manager, SKY

DIRECTV Latin America Investor DayMay 24, 2007

Jon RubinVice President, Investor Relations

4

Cautionary StatementThis presentation may include or incorporate by reference certain statements that we believe are, or may be considered to be, “forward-looking statements” within the meaning of various provisions of the Securities Act of 1933 and of the Securities Exchange Act of 1934. These forward-looking statements generally can be identified by use of statements that include phrases such as “believe,” “expect,” “estimate,” “anticipate,” “intend,” “plan,” “foresee,”“project” or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals also are forward-looking statements. All of these forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or from those expressed or implied by the relevant forward-looking statement. Such risks and uncertainties include, but are not limited to: economic conditions; product demand and market acceptance; ability to simplify aspects of our business model; improve customer service; create new and desirable programming content and interactive features; achieve anticipated economies of scale; government action; local political or economic developments in or affecting countries where we have operations, including political, economic and social uncertainties in many Latin American countries in which DTVLA operates; foreign currency exchange rates; competition; the outcome of legal proceedings; ability to achieve cost reductions; ability to renew programming contracts under favorable terms; technological risk; limitations on access to distribution channels; the success and timeliness of satellite launches; in-orbit performance of satellites, including technical anomalies; loss of uninsured satellites; theft of satellite programming signals; and our ability to access capital to maintain our financial flexibility; and we may face other risks described from time to time in periodic reports filed by us with the SEC.

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Non-GAAP FinancialsThis presentation includes financial measures that are not determined in accordance with accounting principles generally accepted in the United States of America, or GAAP, specifically, Operating Profit before Depreciation and Amortization, Free Cash Flow, Pre-SAC margin and Cash Flow before Interest and Taxes. These financial measures should be used in conjunction with other GAAP financial measures and are not presented as an alternative measure of operating results, as determined in accordance with GAAP. DIRECTV management uses these measures to evaluate the profitability of DIRECTV U.S.’ subscriber base for the purpose of allocating resources to discretionary activities such as adding new subscribers, upgrading and retaining existing subscribers and for capital expenditures. A reconciliation of these measures to the nearest GAAP measure is posted on our website.

Chase CareyPresident & CEO, DIRECTV

Bruce ChurchillPresident, DIRECTV Latin America

8

Agenda

Q&A

Luiz E. Baptista da RochaGeneral Manager, SKY Brasil

SKY Brasil

Lunch11:45 a.m.


Closing Remarks

Alex PennaGeneral Manager, SKY Mexico

SKY MexicoBreak

Jacopo BraccoGeneral Manager, DIRECTV PanAmericana

PanAmericana


Overview

Chase CareyPresident and CEO, DIRECTV, Inc.

Opening Remarks9:00 a.m.

DIRECTV Presence Throughout the Region

1423%

Broadband Subscribers (M)Cable modem as a % broadband

4.2Combined SKY/DIRECTV Subscribers (M)

21,00020%20%

Pay-TVHH (000’s)Pay TV PenetrationSatellite HH as a % of Pay-TV

100+TVHH (M)450Population (M)

MARKET OVERVIEW

The 6th largest Pay-TVPlatform outside the U.S.A.

10

Ownership Structure

The DIRECTV Group

SKY Mexico

DIRECTV Latin America100%

PanAmericanaSKY Brasil

DTVLA 74.1%Globo 25.9%

DTVLA 100% DTVLA 41.3%Televisa 58.7%

█▌ DTVLA

11

DTVLA Profile

Video: 172Audio: 50

Video: 276Audio: 46

Video: 163Audio: 41

Service (# of channels)

2,2602,7502,341Employees(Including outsourced)

151Call Centers

IS 912

Galaxy IIIC31

IS 6B14

SatellitesTransponders

MexicoCalifornia

CaliforniaVenezuelaArgentina

Brazil

BrazilBroadcast Centers

MexicoPanAmericanaBrazil

█▌ DTVLA

12

Strategy

• Premier television experience• Programming/Content• Service• Technology

• Leverage regional scale and DIRECTV USto deliver superior financial performance

• Mitigate regional risk by maintaining local currency cost basis, where possible– Local currency programming contracts– In-market infrastructure and headcount

█▌ DTVLA

13

Premier Programming Offering

Argentina, Colombia, Chile, MexicoRegional Soccer

Golf Channel, Polo, Beach VolleyballNiche ProgrammingExclusiveNFL Sunday TicketExclusiveMLB Extra Innings

Mundial TotalWorld CupExclusive local broadcastsMexican Soccer100% of games availableBrasileirão400 games, 250+ exclusiveLa Liga/EPL

SPORTS

Bacilos, Don Omar, UB40, Alejandro Lerner, Chiquititas, Floricienta, Seal, Peter PanConcerts

Roma (HBO), 24 (Fox)Series PremiereExclusive extended coverageReality Shows24 hour exclusive channelsOn DIRECTV/SKY ONE

UNIQUE PROGRAMMING

█▌ DTVLA

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Scale Economies• Programming

– Delivery to more than 4 million subs– Leverage DTVUS

• Shared services – Broadcast Operations facilities– Regional Call Center (Colombia, Argentina)– IT Networks– Creative Services and Production

• Technical development– $50+ cost savings in box price – Speed to market

█▌ DTVLA

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Scale Economies

Box Cost Savings

$40$50$60$70$80$90

$100$110$120

Oct-04 Apr-05 Oct-05 Apr-06 Oct-06

DTVUS

DTVLA

█▌ DTVLA

16

Technology Roadmap

PANAMERICANASKY

Basic Box

Conditional Access and

DVR Box

Jun-06 Dec-06 Q1-08 Q2-09

█▌ DTVLA

17

Competitive Issues• Stabilized cable industry, largely analog

– Argentina– Brazil– Mexico

• New entrants– Telmex (Brazil, Colombia, Peru)– Telefonica (Brazil, Peru, Chile, Colombia)

• The Bundle– Development lags U.S.– Early stage alliances

• Brazil (BrasilTelecom, Telemar)• Chile (Telefonica Del Sur, Telefonica Manquehue)• Colombia (ETB/Orbitel)• Puerto Rico (PRT)• Argentina (Telecom)

█▌ DTVLA

Luiz E. Baptista da RochaGeneral Manager, SKY Brasil

19

4,540TOTAL656Other (80% cable, 20% MMDS)335Vivax (cable)320TVA (80% cable, 20% MMDS)

1,342SKY Brasil (DTH)1,887Net Serviços (cable)

COMPETITION 000’s

6,00019%

Broadband Subscribers (000’s)Cable modem as a % broadband

1,342SKY Brasil Subscribers (000’s)

4,5409%

30%

Pay-TVHH (000’s)Pay-TV PenetrationSatellite HH as a % of Pay-TV

50TVHH (M)190Population (M)

MARKET OVERVIEW

█▌ BRAZIL

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Strategy• Marketing

– Positioning: “The best TV experience”• “TV experience specialist”

– Acquisition based on leasing model– Programming offer is wide-ranging, including international and

local content, sports, adult and ethnic channels– Recent broadband partnership with local Telcos

to boost sales and compete with triple-play (since March 2007)

• Service– To be recognized as a differentiated company in

terms of quality (in all customer touch-points)• Technology

– To offer enhanced and interactive entertainment experience through a digital platform

█▌ BRAZIL

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█▌ BRAZIL

Sports Programming• Soccer

– “Brasileirão” – Brazilian Soccer Championship• Only operator with 100% of the games

– Regional Soccer Championships– “La Liga Española”

• Exclusive – Spanish Soccer Championship– European Champions League and European

Championships – ESPN/ESPN Brasil

• Other Sports– SporTV/SporTV2 (Globosat)– ESPN/ESPN Brasil– The Golf Channel Latin America (exclusive)– Premiere Combate (Fight Channel)

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█▌ BRAZIL

Non-Sports Programming• Local Content

– GNT – GloboNews (24-hour news)– Multishow

(music video clips, live shows, variety)– Canal Brasil (Brazilian movies, interviews)– Rá-Tim-Bum (1st Brazilian kids channel)

• Big Brother Brasil – (Endemol/Globo’s reality show, 7th edition)

• Adult

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Customer Proposition

█▌ BRAZIL

Digital 2007142 channels R$84.90 (US$42.50)

Digital Plus 2007Digital 2007 + 24 channels R$99.90 (US$50)

38 Channels15 Movies, 12 Sports, 6 Ethnics and 5 Adults

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Customer Proposition

█▌ BRAZIL

All Combos are based on Digital Plus 2007 package

Q1/07:• 54% of total sales with Combos• 76% of total sales with 18-month contract• Hook up fee $0-$75

TeleCine5 channels

HBO Max10 channels

Soccer10 channels

Ethnic5 channels

Adult2 channels

ExtendedWarranty

a1. Family Combo : r rrra 65

2. Soccer Combo: a aarr r 75

a3. Adult Combo: r rra a 80

4. Cinema Combo: a rra a a 85

5. Total Combo: a ra a aa 100

US$/mo.

+

cont

ent

–

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Service Infrastructure

█▌ BRAZIL

– 20 Distributors– 140 District dealers– 1,900 Local partners– Direct sales

–by phone

–by web

– 4 days to activate– 1.0 million work orders

per year

– 1 Call Center Site – 65% outsourced– 35% employees

– 140 District dealers provide field service

SALES & INSTALLATION SERVICE

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TechnologyAlignment with DIRECTV US• DVB in SKY Brasil vs. DSS in DIRECTV US• New Standard Set-Top Box (D12 model)

– Scale gain led to 12% cost reduction– New enhanced features

• DVR (UEC version – South African temporary supplier)– New release: June 2007– Main features

• Dual recording• Live buffer• 64 MB RAM• Video component and digital audio output• 160 GB Hard Disk • 4:3 and 16:9 TV Types

█▌ BRAZIL

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Technology Next Steps

• High definition/DVR Set-Top Box (DIRECTV US version)– Expected launch in Q3/08

• New APG (Advanced Program Guide)– Main features

• Search for events based on author, title or keywords• Channel’s logo in the grid• Ability to introduce advertisement in the grid• Push content (DVR VOD)• DVR functions accessible through interactive engine

– Expected launch in Q3/08

█▌ BRAZIL

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█▌ BRAZIL

Infrastructure: TamboréThe largest Broadcast/Uplink Center in Latin America

• Mission Critical facility• 100% self-reliant operation• Broadcast and Uplink Center

– SKY Brasil• Satellite IS 6B• 14 Transponders

– DTV PanAmericana• Satellite GIIIC• 5 Transponders

– Conditional Access

• Latam Data Hub– SKY Brasil Data Center– SAP Server and Tech Support (Brazil & PanAmericana)

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█▌ BRAZIL

SKY Satellite • Today

– IS 6B – 14 Transponders• 163 video channels• 41 audio channels

– Optimized footprint for Brazil

• October 2008– IS 11 – 18 Transponders

• Full capacity: 270 video channels – Replacement of IS 6B– Same orbital position– Better performance

Key Metrics

1,33210

1.40%134

1,487155

1.25%360

Cumulative SubscribersNet AdditionsMonthly Churn %Gross Additions

SUBSCRIBERS KEY METRICS FY ’06 (1)

█▌ BRAZIL

ExpectedFY ’07

36.0%

$365

$53.00

34.8%Pre-SAC Margin(Excludes non cash gains/losses and satellite lease expense)

$389SAC

$45.65ARPU

FINANCIAL KEY METRICS

(1) SKY Brasil activity consolidated as of August 24th, 2006

Selected Financial Information

9056Total Capex

18062Cash Flow Before Interest and Taxes

8010

250

900

488

Capex SAC relatedNon-SAC related

153OPBDA

417Revenues

█▌ BRAZIL

FY ’06 (1)ExpectedFY ’07

(1) SKY Brasil activity consolidated as of August 24th, 2006

$ Millions

Jacopo BraccoGeneral Manager, DIRECTV PanAmericana

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700Telefonica (Chile, Peru, Colombia)

9,600TOTAL

3,400Other

800Telmex (Colombia, Peru)

800VTR (Chile)

1,362DIRECTV PanAmericana

2,500Cablevision/Multicanal (Argentina)

COMPETITION 000’s

4,20033%


1,362Subscribers (000’s)

9,60028%14%


34TVHH (M)

130Population (M)

MARKET OVERVIEW

█▌ PanAmericana

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Strategy• Profitable growth

– Provide the best TV product/experience• Content• Customer service• Technology

– Leverage synergies within PanAmericana, DTVLA, DTVUS

– Incentives and accountability system– Capitalize on strong DIRECTV brand– Customer segmentation

█▌ PanAmericana

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Sports Programming• Futbol Total – Canal 680

– World Cup 2006 (Mundial Total)– Spanish Soccer (La Liga, Copa del Rey,

Barça TV)– English Premier League– Highlights and Previews

• Other Exclusive Sports– The Golf Channel Latin America– Baseball (MLB Extra Innings, Strike Zone,

Serie del Caribe)– Boxing (DIRECTV’s “Noche de Campeones”)– NFL Sunday Ticket– NASCAR Hot Pass (’07)

█▌ PanAmericana

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Non-Sports Programming• OnDIRECTV Channel 999

– OnStage productions– Concerts and events– Previews and marathons– Update999, OnHollywood, etc

• Audio channels and radios• D’Novela

█▌ PanAmericana

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Flexi Plan

Preferential

VarietyMusicFamilyMovie

News

$23

$35

$45

█▌ PanAmericana

Customer Proposition• Adapted to each

market• Broad range of

choices and prices $93$21Per Month

$100$0Up-Front Fee

MaxMinPrices

$6

$17

38

DIRECTV PlusTM

• Targeting affluent demographics

• Includes premium programming

• DVR service• VIP customer service

█▌ PanAmericana

$100$45Per Month

$260$30Up-Front Fee

MaxMinPrices

39

Pre-Pago™• Pay-as-you-go product• Recharge using widely

available cards• Set-top box and kit sold• Access to PPV• Reduced customer service needs

█▌ PanAmericana

$27$5Per Month

$115$115Up-Front Fee

MaxMinPrices

40


–900+ Dealers/ Sub-dealers–800+ Retailers

– 1,200+ POS

–In-house direct sales:– Telemarketing

– Internet

–2,500+ installers / technicians–1.1M annual work orders

–3 Local Call Centers– Venezuela

– Chile

– Caribbean

–2 Pan-Regional Call Centers– Buenos Aires, Argentina

– Bogotá, Colombia

█▌ PanAmericana

SALES SERVICE INSTALLATION

41

Best Technology• DIRECTV advantage

• Interactive

• Recent and New Developments– DVR

– Cartelera

– Game Lounge

– HD

█▌ PanAmericana

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Subscriber Growth

█▌ PanAmericana

800,000

1,000,000

1,200,000

1,400,000

Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07

CAGR: 15%

Key Metrics

1,560280

1.48%530

1,286Cumulative Subscribers223Net Additions

1.53%Monthly Churn %438Gross Additions

SUBSCRIBERS KEY METRICS

█▌ PanAmericana

FY ’06Expected

FY ’07

40.0%

$380

$42.00

39.2%Pre-SAC Margin(Excludes non cash gains/losses and satellite lease expense)

$366SAC

$40.31ARPU



12088Total Capex


9525

135

720

808


101OPBDA

569Revenues

FY ’06

█▌ PanAmericana

ExpectedFY ’07$ Millions

Alex PennaGeneral Manager, SKY Mexico

515Cablevision

6,030TOTAL

1,612Others

680MVS

870Cablemas

900Megacable

1,453SKY Mexico

COMPETITION 000’s

2,79025%


1,453Subscribers (000’s)

6,03027%24%


22TVHH (M)

104Population (M)

MARKET OVERVIEW

█▌ MEXICO

48

Strategy• Exclusive content

• Client service

• Technology

█▌ MEXICO

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█▌ MEXICO

Exclusive Sports Programming• 50% of World Cup 2006 games• Over 20% Mexican Soccer

League and exclusive local broadcasts• La Liga Espanola• The Golf Channel Latin America• MLB Extra Innings• NFL Sunday Ticket• Boxing• Other International Events

50

█▌ MEXICO

Non-Sports Exclusive Programming• Reality Shows

– Big Brother, Confianza Ciega, El Bar

• SKY ONE• Concerts, Events, Special

Weekends, Others – Pavarotti– Robbie Williams– Los Tenores– Chayanne

51

Basic23%

Premium26%

Fun51%

Customer Proposition• Aggressive promotions,

focused on hook-up fees, multiple set-top boxes andcredit cards

• Direct promotions vs. cable operators

█▌ MEXICO

• Subscribers’ base programming package choice

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– 9 Master Wholesalers and 17 Direct Sales Offices

– 1,600 Dealers– 3,300 points of sales– In-house direct sale:

– Telemarketing in/out

– Internet

– MDUs

– Points of Sales

– 2 days to activation– 3,300 installers /

technicians– 1.0M work orders

annually

– 1 in-house Call Center– Headcount: 1,100– 750K incoming monthly

contacts – 98% phone

– 2% e-mail

– 94% service level – 98% of e-mails

answered within 12 hours

█▌ MEXICO

SALES SERVICE INSTALLATION

53

Technology• Digital quality

• Interactive features (multi-cameras, stats, news, games)

• SKY+ DVR offering

█▌ MEXICO

54

Programming Packages Offer

█▌ MEXICO

Basic Fun MovieCity HBO UniversePs.299 Ps.399 Ps.529 Ps.579 Ps.719(US$27) (US$36) (US$48) (US$53) (US$65)

Video 77 111 119 123 137

Audio 50 50 50 50 50

PPV 26 33 33 33 33

TOTAL 153 194 202 206 220

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Easy Access to Programming

█▌ MEXICO

12 mosaics, easy-to-find all SKY’sprogramming by genre:

• Mosaico 100• TV Nacional• Entretenimiento 1 & 2• Mundo y Cultura• Niños• Cinema 1 & 2• Deportes• Noticias• Musica• Eventos

56

█▌ MEXICO

SKY View Magazine

• Second largest monthlymagazine in Mexico

• 390K units per month

• US$10M annual revenues

• Over 50% margin

Key Metrics

1,430

180

1.0%

380

1,251Cumulative Subscribers

248Net Additions

1.2%Monthly Churn %

447Gross Additions

SUBSCRIBERS KEY METRICS FY ’05

█▌ MEXICO

FY ’06

58.0%

$370

$40.90

54.0%Pre-SAC Margin

$350SAC

$39.50ARPU



204

91

847

326

684

109Total Capex


9019


231OPBDA

550Revenues

FY ’05

█▌ MEXICO

FY ’06$ Millions

DTVLA Summary

█▌ DTVLA

60

Summary• Leading premium platform

• Favorable competitive environment

• Attractive economic structure

• Poised for growth

61

Mexico As The Model• Most developed platform to date

– Consolidation began in 2005– Clear dominant market position

• Unconsolidated value for DTV– Active partnership role– Superior financial performance

• Continued growth ahead

62

DTVLA Financial

~400

~250

~400

~600~2,000

~225179TOTAL

~12079Operating Profit

~16512Cash Flow Before Interest & Taxes

~175~50

~350~1,600

13049

Capex SAC RelatedNon-SAC Related

244OPBDA1,013Revenues

FY ’06ExpectedFY ’07$ Millions

OutlookFY ’09

NOTE: Excludes SKY Mexico

█▌ DTVLA

Drivers of Growth

~$395

~1.30%

~$48

~4,000

~1.35%1.45%Churn

~$380

~$46

~3,100

$371SAC

$41.71ARPU

2,711Subscribers (000’s)YE ’06

ExpectedFY ’07

OutlookFY ’09


█▌ DTVLA

Pre-SAC MarginConsolidated DTVLA

32.6%Adjusted Pre-SAC Margin(9.0%)Non-Cash (Gain)/Loss5.3%Satellite Lease Expense36.3%Pre-SAC Margin63.7%Total Cost as a % of Revenue(9.0%)Non-Cash (Gain)/Loss18.7%G&A

6.0%Subscriber Services1.3%Upgrade and Retention4.9%Broadcast Ops.5.3%Satellite Lease Expense

5.9%Other Direct Costs30.7%Programming

FY ’06Costs as a % of Revenues


█▌ DTVLA

65

A Great Opportunity to Unlock Value

$25.4B$1,9001.6%$650-700$6513.4MEchoStar

$29.2B$1,8001.6%$650-700$7516.1MDIRECTV US

––1.4%$370-390$463.0M(2)DIRECTV Latin America

$3.0B$2,0001.2%$350-370$401.5MSKY Mexico

0.9%

1.0%

Monthly Churn

$1,800

$2,900

Value/Subs (1)

$7.6B$425-450$554.2MSKY Italia

$24.4B$475-500$658.5MBSKYB

ValueSACARPUSubs

(1) Wall Street estimates and company filings(2) Attributable subs based on ownership percentages

█▌ DTVLA

66

Potential ValuationDIRECTV Latin America’s Subscriber Share

DIRECTV Latin America’s Potential Valuation(assumes 3.0M attributable subs)

3.0M4.2MTOTAL0.6M1.5M41%Mexico1.0M1.3M74%Brasil1.4M1.4M100%PanAmericana

Attributable SubsReported SubsOwnership %Region

$5.00$6.0B$2,000$3.75$4.5B$1,500$2.50$3.0B$1,000

Value/DTV ShareValueValue/Sub

█▌ DTVLA

Non-GAAP Financial Reconciliation Schedules

(Dollars in Millions) 2009 FcstSky Brazil PanAmericana DLA Corp/Other DTVLA Sky Brazil PanAmericana DLA Corp/Other DTVLA DTVLA

Operating Profit Before Depreciation and Amortization $153 $101 ($10) $244 $250 $135 ($35) $350 $600

Subtract: Depreciation and amortization expense 70 81 14 165 125 85 20 230 200

Operating Profit $83 $20 ($24) $79 $125 $50 ($55) $120 $400

(Dollars in Millions) 2009 FcstSky Brazil PanAmericana DLA Corp/Other DTVLA Sky Brazil PanAmericana DLA Corp/Other DTVLA DTVLA

Cash Flow Before Interest and Taxes $62 $47 ($97) $12 $180 $30 ($45) $165 $400Adjustments: Cash taxes and net interest received (paid) (12) (6) (4) (22) (45) 0 20 (25) (100)Subtotal - Free Cash Flow 50 41 (101) (10) 135 30 (25) 140 300 Add Cash Paid For: Property and equipment 56 88 31 175 90 120 10 220 250

Net Cash Provided by Operating Activities $106 $129 ($70) $165 $225 $150 ($15) $360 $550

2007 Outlook

DIRECTV Latin America (Excludes Mexico)

Reconciliation of Operating Profit Before Depreciation and Amortization to Operating Profit (Unaudited)

Reconciliation of Cash Flow Before Interest and Taxes and Free Cash Flow to Net Cash Provided by Operating Activities (Unaudited)2006 Actual 2007 Outlook

2006 Actual

Non-GAAP Financial Reconciliation Schedules

(Dollars in Millions)Sky Brazil PanAmericana DLA Corp/Other DTVLA

Operating Profit $83 $20 ($24) $79

Adjustments:

Subscriber acquisition costs (expensed) 42 83 (1) 124

Depreciation and amortization expense 70 81 14 165

Adjustments for satellite lease expense and one-time gains (50) 39 (27) (38)

Pre-SAC margin* $145 $223 ($38) $330

Pre-SAC margin as a percentage of revenue* 34.8% 39.2% n/m 32.6%

Reconciliation of Pre-SAC Margin to Operating Profit (Unaudited)

DIRECTV Latin America (Excludes Mexico)

2006 Actual

DIRECTV Latin America - NASDAQfiles.shareholder.com/downloads/DTV/3660448813x0x160978/7f9625f0... · President, DIRECTV Latin America Closing Remarks Alex Penna General Manager, SKY

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