Economies are growing and the demand for pay-TV services in Latin America is increasing. People have more disposable income and are willing to embrace new pay-TV services. Satellite is likely to be at the forefront of this growth.
Latin America is currently one of satellite’s hot markets, with growth in areas such as DTH, cellular backhaul and even military communications. However, it is the growth in DTH that offers potentially the most benefit.
DirecTV Latin America (DTVLA) remains one of the recent success stories in pay-TV globally. The operator saw its subscribers grow by 30 percent in 2011 and added more than three million subscribers in the region in the same year. Bruce Churchill, CEO, DTVLA, says the company is ready to split into three businesses. “We have our SKY Brazil business. We own around 93 percent of that business. At the end of 2011, that had around 3.8 million subscribers. We have what we call our ‘PanAmericana’ business, which is in Spanish-speaking South America. We own 100 percent of that business, and that has around 4.1 million subscribers,” Churchill says. “The biggest territories here are Argentina and Venezuela. We are a 41 percent shareholder in SKY Mexico, which is the DTH platform in Mexico. Televisa is the majority shareholder there. That business ended 2011 with 4 million subscribers.”
The make-up of DTVLA’s subscribers is changing, and moving away from the top tier of customers who have always been able to afford pay-TV. “If you were to look at our total number of sales, and this would include Mexico, roughly 60 percent of them were in this middle market segment. If you were to look at where we ended up at the end of the year, just under 40 percent of our total base is in those ‘C’ and ‘D’ classes. These were customers that we did not really serve two to three years ago. We are going to get to the point where 50 percent of our overall subscribers are from these ‘C’ and ‘D’ classes very soon,” Churchill says. “Initially, there was resistance from local management level to move more into these segments. We had built up successful businesses with the ‘A’ and ‘B’ classes, and there were concerns about whether moving into other segments would diminish the reputation of our brand. But, we looked at it. What we found was that using our main brands was definitely the way to go, because both were such aspirational brands.”
The targeting of new segments has meant the operator has had to “re-design” its business. “You have to pull programming out of packages, renegotiate rates and break the programmers mindset that they each have to have five channels in the basic package. If you are putting a pay-TV package of 15 channels, not everyone is going to get five,” says Churchill.
The operator’s growth has led to a need for more satellite capacity, and last year it signed a deal with Intelsat for huge amounts of new capacity on the Intelsat 30 and Intelsat 31 satellites, which will be launched in the next two years. It was one of Intelsat’s key deals in 2011. Churchill explains the rationale behind the deal. “We were bumping up against our limits in ‘PanAmericana’ even though our existing satellite had a lot of life left, so we decided to put in place two satellites that give us more capacity. They are more efficiently designed with spot beams, so we get more capacity with the same amount of space segment. It is just better designed for the market overall, he says. “The first one will come on line at the end of 2014. The second, one year later, which will primarily back-up the first. Our expectation is that these satellites will meet our needs for the foreseeable future. In the case of Brazil, we launched a satellite not that long ago. So, we are not bumping up against the same constraints in Brazil that we are in PanAmericana. Mexico is launching another satellite in about 12 months. We launched a satellite two years ago which doubled the capacity available in Mexico.”