…their attention to other services and other regions. While DISH Network focuses on new service offerings through their wireless spectrum acquisition, DirecTV has intensified their focus on South America by combining Vivendi’s GVT with Sky Brazil. Combined with Sky Brazil’s large customer base and content offerings, GVT’s terrestrial Internet and telephone network would provide DirecTV with something it lacks in the U.S.: true triple-play offerings through their own infrastructure.
Noted in NSR’s Global Direct-to-Home (DTH) Markets, 5th Edition, South America remains a growth-focused market, with Brazil leading the charge. By 2021, the number of TV households in South America is projected to surpass North America as incomes continue to rise throughout the region. DTH platforms will reap the most benefit from these gains, adding another 13 million subscribers over the next ten years. Growth will be felt across the value-chain as subscribers upgrade packages to HD and DVRs, and new households enter the market. The steady movement of subscribers towards higher-ARPU packages, as well as new TV households entering the market, will result in nearly $5 billion in annual subscription revenues for DTH platforms in 2021 across South America. All told, the market will generate nearly $35 Billion in revenues from 2011—2021.
Not alone in their bid for GVT, America Movil SAB (which operates the Claro brand and has a strong presence in Argentina) also advanced into the second-round of bidding (reports have said) along with two other bids from private equity investors. Likely looking to expand their presence within Brazil, America Movil will represent a significant hurdle to a successful DirecTV acquisition. The company already has terrestrial and satellite offerings within the region, and access to GVT’s customer base will continue to accelerate their growth prospects and diversify their coverage area. Private equity is unlikely to be a viable contender, as cost advantages and network gains significantly favor both American Movil and DirecTV. As both companies are well funded, have positive revenue outlooks, and are already invested within Brazil, it is very likely bidding will be extremely intense.
With an expanding middle class, even during the economic recession, DTH players in the region continue to be focused on both expanding the bottom today, and building the networks to service the media demands of a connected-generation tomorrow. As seen in North America and elsewhere, media consumption continues to shift away from linear-TV towards non-linear, typically Internet-based platforms. However, Internet connectivity (both fixed and mobile) remains the key enabler to deliver these next-generation media services to subscribers. Hopefully learning a lesson from their U.S. operations, GVT’s assets would represent a significant advantage to both DirecTV’s Sky Brazil, and DirecTV’s bottom line in enabling the next-generation of media delivery.
The Bottom Line—Facing stalled growth prospects at home, South America will be a key revenue source for DirecTV. With Sky Brazil posting impressive subscription and revenue growth for the company across both the low, middle, and high-end subscribers, an acquisition of Vivendi’s GVT would provide access to both the GVT subscriber base, and more importantly, its terrestrial network, and give DirecTV a key advantage it does not have in the U.S. (NSR analysis by Brad Grady, NSR USA.)
