DIRECTV Latin America 2008 Media Fall Preview

Transcription

1 DIRECTV Latin America 2008 Media Fall Preview Bruce Churchill President DIRECTV Latin America

2 Cautionary Statement and Non-GAAP Financials Cautionary Statement: This presentation includes certain statements that may be considered to be, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 ( PSLRA ). These forward-looking statements generally can be identified by words 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 improve customer service or create new and desirable programming content and interactive features; government action; 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 reliance on satellites as a significant part of our infrastructure and we may face other risks described from time to time in periodic reports filed by us with the SEC. Non-GAAP Financials: This presentation includes financial measures that are not determined in accordance with GAAP, such as Operating Profit before Depreciation and Amortization, Free Cash Flow 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 and is included at the end of this presentation package.

3 DIRECTV Latin America The 4th largest Pay-TV platform outside the USA with 5.5M subscribers DTVLA Regions Brazil PanAmericana Mexico Ownership 74% 100% 41% Partner Globo N/A Televisa Brand SKY DIRECTV SKY Subscribers 1. 7M 2.1M 1.7M

4 DIRECTV Latin America Market Low Pay-TV penetration throughout the regions Brazil 11%, PanAmericana 36%, Mexico 28% Like USA, cable is our main competitor Digital roll-out only in major urban markets Bundle product offers (data, voice, wireless) gaining traction: Telmex, Telefonica Advanced products (DVR) only in infancy Nascent HD content offerings

5 DIRECTV Latin America Strategy Adapt DIRECTV US roadmap to Latin America Content and technology leader Customer service superiority Push whole home experience Expand Pre-paid offer into new regions Introduce HD and secure leadership position

6 DIRECTV Latin America Strategy Content Leadership Sports and exclusivity rights where possible (e.g. La Liga, EPL, Local Soccer) Partnership where strategic value exists (e.g. Televisa, Globo, TyC) Concerts, Special Events Leverage technology leadership of DIRECTV US Speed to market, superior product and lower cost

7 DIRECTV Latin America Strategy Superior Customer Service Combination of local and regional call centers: Bogota, Cali Developed alternative communication channels (e.g. Mobile) Improve self-care services Brazil subscribers contacts evolution IVR, 20% Phone, 49% IVR, 26% Phone, 45% IVR, 29% Phone, 69% Internet, 11% Internet, 25% Internet, 26% Jan 08 Jun 08 Dec 08 (E)

8 DIRECTV Latin America Strategy Push whole home experience Increase DVR and multiple set-up boxes penetration Expand broadband alliances Expand Pre-paid offer into new regions Brazil, Mexico, Colombia, Puerto Rico, Peru and Chile Introduce HD and secure leadership position Launch in PanAmericana Q Launch in Brazil Q Launch in Mexico Q4 2009

9 Pre-pago DIRECTV High familiarity with Pre-paid Completely cash based Favorable economics Minimum net SAC No bad debt Minimum on-going subscriber costs 80+% reactivation behavior after first 3 months in Venezuela Buy kit Self Self Installation Installation Buy scratch card Enter Enter PIN PIN # # to to activate activate Enjoy DIRECTV experience

10 DTVLA - HD Launch PanAmericana will launch in Q channels in Puerto Rico and 3-5 channels in the rest of the regions Sky Brasil Expected to launch in Q channels package including top programming providers Sky Mexico Expected to launch in Q channels package including Mexican soccer league, MLB, Spanish soccer league and PPV

11 Key Metrics Update 2007 Outlook 2006 Outlook Actual 2009 Subscribers (000's) 2,711 ~3,100 3,279 ~ 4,000 ARPU (US$) $ ~$46.00 $ ~$48 Monthly churn 1.45% ~1.35% 1.38% ~1.3% SAC (US$) $ 371 ~$ 380 $ 361 ~$395 Revised Outlook 2008 ~$55 ~1.6% Expect to meet or exceed most key 2009 targets by end of 2008

12 Financial Information Update (in US$ millions) 2007 Outlook 2006 Outlook Actual 2009 Revenue $ 1,013 ~$1,600 $ 1,719 ~ $2,000 OPBDA $ 244 ~$350 $ 394 ~ $600 Operating profit $ 79 ~$120 $ 159 ~ $400 CapEx SAC related $ 130 ~$175 $ 296 Non-SAC related 49 ~50 40 Sub-Total $ 179 ~$225 $ 336 ~ $250 Revised Outlook 2008 ~$2,200+ ~$625+ ~$450 Cash flow before interest and taxes $ 0 ~$165 $ 140 ~ $400 ~$250 Expect to meet or exceed most key 2009 targets by end of 2008

13 DTVLA Valuation DTVLA Ownership % Subscribers Attributable Subscribers PanAmericana 100% 2.1M 2.1M Brazil 74% 1.7M 1.3M Mexico 41% 1.7M 0.7M Total 5.5M 4.1M 4.1M attributable subscribers at $1,400 = ~$5.7B or ~$ of DTV market value Notes 1. DTVLA target price is derived from an average of several analysts

14 DTVLA Valuation Carving out DTVLA value 5-Sep-2008 DTV trading value $26.57 Less avg. target price for DTVLA ($5.20) 1 2 Implied DTV-US trading value $21.37 or 10x (Price/Free Cash Flow ) 2 DTVUS versus Competitors (Price/Free Cash Flow ) Time Warner Cable Comcast Dish Network DTV-US 23x 18x 12x 10x Notes 1. DTVLA target price is derived from an average of several analysts Consensus

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16 DTVLA Non-GAAP Financial Reconciliations Reconciliation of Operating Profit Before Depreciation and Amortization to Operating Profit Twelve Months Ended December 31, 2008 Outlook (Dollars in Millions) Operating Profit Before Depreciation and Amortization ~625+ $394 $244 Subtract: Depreciation and amortization expense ~ Operating Profit ~$400 $159 $79 Revenue ~$2,200 $1,719 $1,013 OPBDA Margin ~28% 22.9% 24.1% DIRECTV Latin America Reconciliation of Cash Flow Before Interest and Taxes and Free Cash Flow to Net Cash Provided by Operating Activities Twelve Months Ended December 31, 2008 Outlook (Dollars in Millions) Cash Flow Before Interest and Taxes ~$250 $140 $0 Adjustments: Cash paid for interest (27) (12) Interest income Income taxes paid * ~(100) (51) (14) Add Cash Paid For: Property and equipment ~ Net Cash Provided by Operating Activities ~$600 $416 $165 *Outlook data combines interest received, interest paid and income taxes paid under income taxes paid