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AT&T's deal with DirecTV could be their door to Latin America

AT&T's deal with DirecTV could be their door to Latin America

Posted by Liliana Castaño on May 22, 2014

AT&T Inc's  acquisition of DirecTV will give the U.S. wireless provider a foothold in Latin America, a region that offers major growth potential in pay television and mobile broadband.

DirecTV, with its 18 million subscribers in Central and South America, is the biggest pay TV provider in Latin America where the market for such services is already growing at a much faster rate than the mature U.S. market.

DirecTV is "advantaged when compared with cable and telco in Latin America," AT&T said in a press release announcing its $48.5 billion proposal on Sunday. "Latin America has an under-penetrated pay TV market, about 40 percent of households subscribe to pay TV, and a growing middle class, and is DirecTV's fastest-growing customer segment."

Underscoring the importance of Latin America to the logic of the deal, AT&T said it would part with its $5 billion stake in billionaire Carlos Slim's America Movil to smooth the regulatory process and win DirecTV's business in the region.

DirecTV's Latin American operations have been considered its crown jewels for the past few years, accounting for 95 percent of its subscriber growth, but just 20 percent of its revenues.

DirecTV expects revenue to be in the $8 billion to $9 billion range, down from a prior forecast of $10 billion by 2016.

DirecTV owns about 93 percent of Sky Brasil, the largest satellite provider in the region's biggest economy. It has 41 percent of Sky Mexico, controlled by Mexico's Televisa and serving Mexico, Central America and the Dominican Republic.

It owns 100 percent of PanAmericana, which offers satellite TV services under the DirecTV brand in countries including Venezuela, Argentina, Chile, Colombia and Puerto Rico.

In December, DirecTV said it had an annual compound growth rate of 22 percent in Argentina, 16 percent in Venezuela and about 32 percent in the other countries served by PanAmericana, such as Colombia and Chile.

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