Latin American TV (8th Edition)

Transcription

1 Latin American TV (8th Edition) Highlights By 2010, pay TV revenues in Latin America are forecast to be nearly US$11 billion double the 2002 figure. Pay TV subscriptions are anticipated to reach 25.6 million. The region is forecast to triple from 3.9 million digital subscribers at end-2003 to 12.7 million by Brazil and Mexico combined accounted for 70% of digital subs by end-2003, but this share will fall to 54% in 2010 as the other countries thrive. By 2010, 12.7 million homes will receive digital signals, or 12% of TV households. A further 14 million homes will still take analogue cable signals, or 13% of TV households. Therefore, threequarters of TV households will not receive multichannel services, revealing a significant potential market. By 2010, Latin America is forecast to have 20.6 million cable and MMDS subscribers, up 5 million on This means that 19% of the region's TV households will take cable or MMDS services. These homes will generate revenues of US$8.4 billion. Of this total, 6.5 million homes will subscribe to digital cable services by 2010 or 6.0% of TV households in the region.

2 Latin American TV 8th edition

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4 Informa Media Research TAILORED RESEARCH BESPOKE BRIEFINGS CASE STUDIES PROPRIETARY DATABASES PROPRIETARY FORECASTS PARTNER ANALYSIS MARKET RESEARCH COMPETITOR ANALYSIS Accurate and reliable bespoke research from the publishers of: iii

5 AUTHORS Adam Thomas, Simon Dyson, REPORT STAFF Simon Murray, Publisher Faiza Carter, Production Manager HEAD OFFICE Mortimer House Mortimer Street London W1T 3JH Web site: CUSTOMER SERVICE Phone: (44) Fax: (44) Printed in UK in February 2004 ISBN: Copyright 2004 Informa Media Group. All rights reserved Simon Murray, Publisher Simon has been involved in international media and entertainment research since He leads various consultancy projects for Informa Media. His responsibilities include establishing a series of reports and forecasts that cover burning issues in the international media and entertainment sectors. Before starting at Informa Media, Simon worked for Baskerville Communications, Kagan World Media and Saatchi & Saatchi. Adam Thomas, Research Manager Since graduating from London Guildhall University in 1994, Adam has been involved in several roles within the media industry. He worked as a journalist at Channel 11 and as senior media analyst at Market Tracking International, before joining Informa Media Group in 2000 as Media Research Manager. Adam has written, or co-authored, many reports on the film, TV, games and new media sectors. Simon Dyson, Senior Research Analyst Simon is a music and media analyst who joined Informa Media Group in November Following a lengthy career in the music industry he returned to education and gained a BSc in Media Studies at South Bank University. He then worked for a research company specialising in music, including compilation of the MBI World Report, as well as music broadcasting and online issues. iv

6 Contents Staff iv CHAPTER 1: SUMMARY Latin America forecasts Digital TV households (000) Digital TV penetration of TV households in 2010 (%) TV household composition in 2010 (000) Subscription TV revenues in 2010 (US$ mil.). 6 Cable/MMDS Cable/MMDS growth Digital cable/mmds growth Cable/MMDS revenues Digital DTH Latin American digital DTH subscribers Digital DTH in Brazilian DTH subscribers (000) Mexican DTH subs DirecTV Latin America DirecTV Latin America subscribers (October 2003) DirectTV Latin America s local operations DirecTV Latin America financials (mil.) DirecTV Latin America estimated financials (US$ mil.) Sky Latin America Ownership structure (%) Sky Latin America profits/ (losses) for 12 months ended June (A$ mil.) DSL entertainment DSL entertainment subs in DTT DTT households by Forecasts Latin American TV households Latin American digital terrestrial households. 17 Latin American cable TV subscribers Latin American cable subs as a % of TV households Latin American digital cable TV subscribers. 18 Latin American digital cable subs as a % of TV households Latin American cable subscription revenues ($ mil.) Latin American cable PPV movie revenues ($ mil.) Latin American cable revenues ($ mil.) Latin American cable revenues per subscriber ($) Latin American digital DTH subscribers (000) Latin American digital DTH subscribers as a % of TV households Latin American digital DTH subscription revenues ($ mil.) Latin American digital DTH PPV movie revenues ($ mil.) Latin American digital DTH revenues ($ mil.) Latin American digital DTH revenues per subscriber ($) Latin American DSL entertainment subs (000) Latin American DSL entertainment subs as a % of TV households Latin American DSL entertainment subscription revenues ($ mil.) Latin American DSL entertainment VOD movie revenues ($ mil.) Latin American DSL entertainment subs revenues ($ mil.) Latin American DSL entertainment revenues per subscriber ($) Latin American cable, digital DTH & DSL entertainment subs (000) Cable, digital DTH & DSL ent. subs as a % of TV households PPV digital cable, DTH & DSL entertainment subs.(000) Digital cable, DTH & DSL entertainment subs as a % of tv households Subscription revenues ($ mil.) PPV movie revenues ($ mil.) Total pay TV revenues ($ mil.) Subscription TV revenues per subscriber ($).. 26 v

7 CHAPTER 2: ARGENTINA Overview Argentina: Economic indicators Regulation Piracy Cable Argentine cable channel rankings MSO subscriber numbers Cablevision Multicanal Multicanal penetration (September 2003) Multicanal unaudited financial highlights (Ps mil.) Supercanal Satellite DirecTV Latin America subscribers (October 2003) Broadband Leading broadband players (September 2003) DTT Terrestrial Argentine broadcasters Top 10 programmes (Sept.-Nov. 2003) Release windows Advertising Gross advertising expenditure ($ mil.) Forecasts Argentina forecasts CHAPTER 3: BOLIVIA Overview Bolivia: Economic indicators Pay TV Financial details for Multivision (C$) Terrestrial Channel profiles Advertising CHAPTER 4: BRAZIL Overview Brazil: Economic indicators Pay TV subscribers (000) Cable and MMDS Brazilian operator information (Dec. 2002). 55 Brazilian cable channel rankings NET Servicos de Comunicacao NET Servicos highlights NET subscriber patterns NET Servicos revenues by source (%) Tevecap (TVA) TVA ownership structure (January 2004) TVA subscriber data Households receiving TVA programming TVA financial highlights (R$ mil.) TVA financial summary ITSA ITSA: Market data (January 2004) ITSA financial details (year-ending December 31) Canbras/Horizon Canbras operating data TV Cidade Satellite Brazilian DTH subscribers (000) Sky Brazil DirecTV DirecTV Brazilian monthly packages (R$).. 66 DTT Terrestrial Globo SBT Viewing/programming Viewing share by channels (%) Top 10 programmes (Sept.-Nov. 2003) Release windows Advertising Gross advertising expenditure ($ mil.) Forecasts Brazil forecasts CHAPTER 5: CHILE Overview Chile: Economic indicators Cable VTR Global Com subs figures Metropolis-Intercom figures Satellite Sky TV Premium extras Broadband Broadband homes Terrestrial Viewing/programming Free-to-air channels imports (%) Free-to-air programmes by genre (%) vi

8 Split of programmes by genre (2002) Top 10 programmes (November 2003) Release windows Advertising Gross advertising revenues (Ps mil.) Forecasts Chile forecasts CHAPTER 6: COLOMBIA Overview Colombia: Economic indicators Cable Satellite DirecTV DirecTV Colombia monthly package fees (January 2004) DirecTV Colombia premium offerings (January 2004) Sky TV Colombia Sky TV Colombia monthly package fees (January 2004) Sky TV Colombia premium offerings (January 2004) Terrestrial RCN Caracol Television Inravision Viewing/programming Top 10 programmes for November Release windows Advertising Gross advertising expenditure (Ps mil.) Top 10 national TV advertisers (2003) Forecasts Colombia forecasts CHAPTER 7: COSTA RICA Overview Key Costa Rican TV networks Costa Rica: Economic indicators Cable Satellite Viewing/programming Top 10 programmes for October Advertising Advertising expenditure ($ mil.) CHAPTER 8: DOMINICAN REPUBLIC Overview Dominican Republic: Economic indicators. 106 Cable Telecable Nacional statistics Telecable Nacional package pricing Terrestrial Leading terrestrial broadcasters CHAPTER 9: ECUADOR Overview Ecuador: Economic indicators Cable TV Cable monthly package options Satellite DirecTV monthly charges ($) Viewing/programming Share of imported programming in 2002 (%) Advertising Gross ad spend (ECS bil.) CHAPTER 10: EL SALVADOR Overview El Salvador: Economic indicators (%) El Salvador terrestrial TV channels Cable Satellite Viewing/programming Advertising CHAPTER 11: GUATEMELA Overview Guatemala: Economic indicators Cable Guatemala cable coverage Satellite Viewing/programming Top 10 programmes for October CHAPTER 12: HONDURAS Overview Honduras: Economic indicators Cable Satellite vii

9 Terrestrial Honduras: Leading terrestrial broadcasters. 125 CHAPTER 13: MEXICO Overview Mexico: Economic indicators Mexico: TV households Pay TV subscribers (000) Cable/MMDS Leading cable/mmds MSOs (June 2003). 131 Multivision MVS Multivision subscriber count Cablevision Megacable Cablemas Satellite Latin American digital DTH subscribers Mexican DTH subs Innova/Sky Mexico Innova financial highlights Innova TV channel monthly packages DirecTV Mexico Terrestrial Televisa Televisa financial highlights (Ps Mil.) TV Azteca TV Azteca ownership structure (December 2003) TV Azteca: Financial performance (Ps000) Viewing/programming Prime time viewing share (July-September 2003) Top 10 programmes (July-September 2003) Release windows Advertising Mexico TV ad spend Forecasts Mexico forecasts CHAPTER 14: PANAMA Overview Panama: Economic indicators Cable Satellite Viewing/programming Top programmes (October 2003) Advertising CHAPTER 15: PARAGUAY Overview Parguayan TV networks Paraguay: Economic indicators Cable Multicanal Paraguay figures at end Satellite Viewing/programming Top 10 programmes (September 2003) Advertising Gross advertising revenues ($ mil.) CHAPTER 16: PERU Overview Peru: Economic indicators Release windows Cable Telefonica cable TV subscriber growth Satellite Viewing/programming Ratings share (August-October 2003) Advertising Gross advertising expenditure CHAPTER 17: PUERTO RICO Overview Puerto Rico: TV Households (000s) Puerto Rico s pay TV market Cable Puerto Rico cable overview (June 2003) Puerto Rico cable chronology Satellite DSL Terrestrial Puerto Rico: Leading terrestrial broadcasters (2003) Advertising Puerto Rico: Gross advertising expenditure ($ mil.) Forecasts Puerto Rico forecasts CHAPTER 18: URUGUAY Overview viii

10 Uruguay: Economic indicators Cable Montevideo cable coverage Satellite Terrestrial Selected channel profiles Release windows Advertising CHAPTER 19: U.S. HISPANIC Overview U.S.: Hispanic & Latino Population (July 1, 2002) U.S.: Top 25 Hispanic TV markets (January 2003) Hispanic TV networks Univision Univision Com. financials for nine months ending September 30 ($000) Univision historic annual financial performance ($000s) Telemundo Telemundo Portfolio Azteca America Cable Satellite Rival package prices (January 2004) Release windows Advertising Gross advertising revenues (Bolivar mil.) Forecasts Venezuela forecasts GLOSSARY APPENDIX CHAPTER 20: VENEZUELA Overview Venezuela: Economic indicators Cable Pay TV households CableTel monthly packages (Bs) Broadband/DSL Satellite DirecTV s Venezuelan charges (January 2004) Terrestrial Venezuela terrestrial TV channels Radio Caracas Television Venevision Televen VTV Viewing/programming Audience share in prime time (July - September 2003) Top 10 programmes (October 2003) ix

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12 CHAPTER 1 Summary 1

13 Latin America forecasts TV Households (000) 83,059 86,304 87,732 89,143 90,580 92,040 93,496 95,031 96,562 98,120 99, , , , , ,013 Digital Terrestrial TV Homes (000) ,303 DTT/TV HH (%) Cable/MMDS Cable Subscribers (000) 10,749 12,420 13,170 14,315 14,035 15,048 15,464 15,179 15,582 16,086 16,788 17,506 18,244 19,011 19,809 20,647 Cable Subs/TV Households (%) Digital Cable Subs (000) ,304 1,924 2,735 3,608 4,507 5,472 6,464 Digital Cable Subs/TV HH (%) Digital Cable Subs/Cable Subs (%) Subscription Revenues ($ mil.) 3,534 3,803 4,192 4,496 4,626 4,689 4,489 4,401 4,632 4,960 5,376 5,855 6,372 6,932 7,540 8,203 Digital PPV Movie Revs ($ mil.) Cable Revenues ($ mil.) 3,534 3,803 4,192 4,496 4,626 4,690 4,494 4,413 4,654 4,995 5,428 5,930 6,476 7,068 7,711 8,413 Revenues per sub ($) Digital DTH Digital Dish Homes (000) ,027 1,691 2,343 2,942 3,164 3,040 3,154 3,338 3,559 3,769 3,987 4,211 4,442 Dish/TV Households (%) Subscription Revenues ($ mil.) ,053 1,143 1,197 1,308 1,450 1,607 1,775 1,958 2,157 PPV Movie Revenues ($ mil.) DTH Revenues ($ mil.) ,047 1,133 1,228 1,287 1,406 1,558 1,727 1,907 2,103 2,317 Revenues per sub ($) DSL Entertainment DSL Entertainment Subs (000) DSL Ent. Subs/TV Households (%) Subscription Revenues ($ mil.) VoD Movie Revs ($ mil.) DSL Ent. Revenues ($ mil.) Revenues per sub ($) Subscription TV Homes Cable, Digital DTH & DSL Ent Subs (000) 10,749 12,437 13,680 15,342 15,726 17,391 18,407 18,343 18,623 19,240 20,127 21,068 22,041 23,117 24,309 25,628 Subs/TV Households (%) Digital Cable, DTH & DSL Ent Subs (000) ,027 1,691 2,408 3,213 3,668 3,880 4,458 5,262 6,297 7,405 8,612 9,972 11,444 Subs/TV Households (%) Subscription Revenues ($ mil.) 3,534 3,806 4,281 4,766 5,111 5,425 5,471 5,454 5,775 6,157 6,684 7,305 7,985 8,739 9,592 10,559 PPV/VoD Movie Revenues ($ mil.) Total Revenues ($ mil.) 3,534 3,806 4,286 4,782 5,141 5,473 5,541 5,545 5,882 6,282 6,835 7,489 8,209 9,008 9,915 10,945 Revenues per sub ($) Note: All figures refer to year-end Source: Informa Media Group 2

14 SUMMARY Latin America is slowly crawling out of recession. The region s problems are exacerbated by the reliance of most economies on other markets. This happens both within the region, such as Uruguay with Argentina and Brazil, and outside the region as the state of the U.S. economy impacts Latin America. Low inflation and high GDP growth enjoyed in the late 1990s were replaced by high inflation rates, low investment, political turmoil and low growth. Heavy debt loads incurred during the fast expansion period, spurred by the healthy economic environment in the late 1990s, have further added to the problems. Additionally, many companies cancelled IPOs and other financial instruments due to the poor market conditions and the reluctance to take risks. Despite this gloomy picture many of these economies started to come out of recession in late Many of the region s currencies have appreciated against the dollar. Exchange rate fluctuations had caused havoc with rocketing local prices of imports from the U.S. This has had a detrimental effect on the TV sector as many cable and satellite operators pay international channels in US$ but receive subscription and ad revenues in local currencies. Operators sometimes pass on these extra costs to their subscribers, causing high churn. Dollar denomination contracts also lead to greater piracy and subscriber underreporting by some operators. DirecTV Latin America declared bankruptcy as it could not renegotiate dollardenominated deals into local currencies and/or reduce its dollar-denominated debts. The result of this uncertainty was that the region s pay TV revenues and subscriptions both fell in However, there was a small recovery in 2003, due to the upturn in the second half of the year. By 2010, pay TV revenues in Latin America are forecast to nearly US$11 billion double the 2002 figure. Pay TV subscriptions are anticipated to reach 25.6 million. Several factors have pulled the TV sector out of recession. Additional revenues resulting from telecoms deregulation encouraged cable operators to upgrade their networks to a standard that provides voice, internet and digital TV services. Operators that upgrade can enhance their TV offerings, adding new services such as pay-per-view movies and tiering. Due to overbuilding, operators traditionally provided large basic packages and no premium programming. Tiering channels, which were available on their competitors basic packages, would have lost them subscribers. Consolidation has, however, severely reduced the field of players, allowing operators to upgrade without the fear of losing subs. Wealthier operators will be able to buildout and upgrade faster than the traditional single network operators. 3

15 SUMMARY LATIN AMERICAN TV Digital TV households (000) Argentina ,212 Brazil 1,232 1,328 1,520 3,345 Chile Colombia Mexico 1,499 1,704 1,928 3,538 Puerto Rico Venezuela Rest of Region Total 3,880 4,458 5,262 12,747 Note: All figures refer to year-end. Source: Informa Media Group Despite the gloomy economic environment at present, most Latin American countries are coming out of recession. With growth albeit limited expected from now on, the pay TV market will enjoy a resurgence. The region is forecast to triple from 3.9 million digital subscribers at end-2003 to 12.7 million by Brazil and Mexico combined accounted for 70% of digital subs by end- 2003, but this share will fall to 54% in 2010 as the other countries thrive. Digital TV penetration of TV households in 2010 (%) Cable DTH DSL Ent. DTT Total Argentina Brazil Chile Colombia Mexico Puerto Rico Venezuela Total Source: Informa Media Group By 2010, 12% of the region s TV households will receive digital signals. Cable will represent the largest sector, though DTH will follow close behind. DTT multichannel free signals are considered ideal for poorer neighbourhoods, but DTT is not expected to launch until the end of the decade. Puerto Rico is expected to enjoy the highest digital penetration by 2010, at 43% of TV households, with the island benefitting from its close relationship with the U.S. Puerto Rico will be followed by Chile, Argentina and Mexico. Among the main countries, Colombia will have the lowest penetration, due to the widespread availability of pirate signals. 4

16 SUMMARY TV household composition in 2010 (000) Cable Satellite DSL Ent. DTT Total Argentina 5, ,993 Brazil 3,200 1, ,040 Chile 1, ,090 Colombia* ,013 Mexico 4,417 1, ,659 Puerto Rico ,266 Venezuela ,250 Rest of Region 4, ,701 Total 20,647 4, , ,013 Note: Total column also includes homes that do not subscribe to cable, satellite, DSL entertainment or DTT. * Legitimate subs only. Source: Informa Media Group By 2010, 12.7 million homes will receive digital signals, or 12% of TV households. A further 14 million homes will still take analogue cable signals, or 13% of TV households. Therefore, three-quarters of TV households will not receive multichannel services, revealing a significant potential market. By 2010, Latin America is forecast to have 20.6 million cable and MMDS subscribers, up 5 million on This means that 19% of the region s TV households will take cable or MMDS services. These homes will generate revenues of US$8.4 billion. Of this total, 6.5 million homes will subscribe to digital cable services by 2010 or 6.0% of TV households in the region. Cable operators were obliged to improve their services following the success of the digital DTH packages DirecTV Latin America and Sky. However, many of these upgrades have been put on hold due to the economic problems. Luckily for the cable operators, Sky and DirecTV have also seen a slowdown in subscriber numbers. These two DTH operators had 3 million digital subs by end-2003, down 4% on the previous year. The digital DTH subs count is likely to reach 4.4 million by 2010, generating US$2.3 billion for the operators and representing 4.2% of TV households. DSL is still very new to Latin America, and none of these operators is offering video services at present. Latin America is forecast to have 539,000 DSL entertainment subscribers by 2010, representing 0.5% of TV households and generating revenues of US$215 million. Though most governments are yet to reveal firm plans, digital terrestrial TV services are assumed to start towards the end of the decade. Non-cable, satellite and DSL entertainment homes are the target for these signals. By 2010, Latin America is forecast to have 1.3 million DTT homes, representing 1% of TV households. 5

17 SUMMARY LATIN AMERICAN TV Subscription TV revenues in 2010* (US$ mil.) Cable DTH DSL Ent. Total Growth 2010/2003 (%) Argentina 2, , Brazil 1, , Chile Colombia Mexico 1, , Puerto Rico Venezuela Rest of Region 1, , Total 8,413 2, , * Basic, premium and PPV/VoD movie revenues only. Source: Informa Media Group TV revenues from cable, satellite and DSL entertainment are expected to reach US$11 billion in 2010, an 86% increase on the 2003 figure. Of the 2010 sum, cable will represent 77% of the total. Digital DTH subscriptions will bring in 21% of the total, and DSL entertainment 2%. Brazil, Mexico and Argentina will provide 22%, 22% and 25% of the 2010 total, respectively. Colombia is the fastest growing nation, rising 161% in the decade to 2010, though the country suffers one of the highest inflation rates in the region. The Colombian figures are for legitimate subscribers only, the country has a serious piracy problem. Revenues per subscriber have steadily risen, and are likely to continue to do so, especially between 2005 and The reason for this is the greater adoption of digital packages, which offer a wider array of services. DTH has the highest revenues per subscriber, but digital cable subscribers spend similar amounts. These figures do not include cable internet or telephony services. Cable/MMDS Prior to the recession, many companies had plans for substantial cable investment, which involved either upgrading networks or expanding to new areas. Consolidation removed the threat of overbuilding and allowed operators to offer tiering without the fear of losing subscribers. A major incentive for cable upgrades is telecoms deregulation. The possibility of new revenue streams encouraged significant investment, though many plans were curtailed following the onset of the recession. Upgraded networks not only allow for the introduction of telephony and internet services, but also provide for a far wider range of TV channels, including PPV and tiering. 6

18 SUMMARY Cable/MMDS growth Subs (000) Penetration (%) Argentina 4,750 4,845 5, Brazil 2,330 2,388 3, Chile 916 1,007 1, Colombia Mexico 3,200 3,296 4, Puerto Rico Venezuela Rest of Region 3,116 3,217 4,129 n/a n/a n/a Total 15,582 16,086 20, Source: Informa Media Group By 2010, the region is expected to have 20.6 million cable and MMDS subscribers, up from 15.6 million at end The Big Three will command 64% of subs in 2010, though this proportion is slightly down from 66% in Argentina will retain the highest number of cable subs. Brazil and Mexico will enjoy considerable growth. Argentina will retain the highest penetration, recording 47% in 2010, compared to the regional average of 19.3% and Brazil s and Mexico s 7.4% and 21.4% respectively. The subscriber figures for Colombia are for the legal networks only, and do not include the 3 million subs to pirate networks, most of the subs to illegal networks are expected to convert to legal systems during the forecast period. Digital cable/mmds growth Subs (000) Penetration (%) Argentina , Brazil , Chile Colombia Mexico , Puerto Rico Venezuela Rest of Region n/a n/a n/a Total 840 1,304 6, Source: Informa Media Group The region is forecast to have 6 million digital cable homes by 2010, representing 6% of TV households or 31% of cable subscribers. Colombia is likely to lag behind the other countries as upgrades will be stifled until the piracy problem is dealt with. 7

19 SUMMARY LATIN AMERICAN TV Cable/MMDS revenues Revenues (US$ mil.) Per sub (US$) Argentina 1,537 1,589 2, Brazil , Chile Colombia Mexico , Puerto Rico Venezuela Rest of Region ,656 n/a n/a n/a Total 4,654 4,995 8, Source: Informa Media Group By 2010, Latin American cable/mmds operators are expected to enjoy revenues of $8.4 billion. The Big Three will take two-thirds of this total. The average subscriber will spend US$108 more on cable/mmds services by 2010 compared with PPV movie revenues are forecast to reach US$385 million by 2010, assuming that the average digital cable subscriber buys one PPV movie each month. Digital DTH Rumours suggest that Sky and DirecTV will merge their DTH operations following News Corp. s acquisition of a significant stake in Hughes Electronics. Hughes has a 34% shareholding in DirecTV Latin America and News Corp. already owns part of Sky Latin America. Latin American digital DTH subscribers End-2001 End Q Q 2003 DirecTV Latin America 1,600 1,610 1,615 1,587 Sky Latin America 1,600 1,600 1,600 1,624 Total 3,200 3,210 3,215 3,211 Note: These figures include commercial subscribers, such as bars and restaurants. Source: TV International A merger may also be on the cards as DirecTV Latin America is in Chapter 11 bankruptcy. The bankruptcy was forced by the region s economic problems, which saw many potential subscribers tighten their belts, as well as the company having to pay programmers in US$ denominated deals, but receiving subscription fees in local currencies that lost ground against the US$. Furthermore, local partners to both platforms have proved reluctant to increase their investments. 8

20 SUMMARY For the time being the two operations continue to work independently. In fact, they only compete in four Latin American markets (Brazil, Chile, Mexico and Colombia). Sky pulled out of Argentina in June 2002 due partly to high cable penetration and competition from DirecTV. Sky concentrates on the main markets whereas DirecTV takes a broad brush approach to the whole region and is active in 28 territories. Digital DTH in 2010 Subs (000) Penetration (%) Revenues (US$ mil.) Rev/Sub (US$) Argentina Brazil 1, Chile Colombia Mexico 1, Puerto Rico Venezuela Rest of Region 133 n/a 70 n/a Total 4, , Source: Informa Media Group Latin America is forecast to have 4.4 million digital DTH subscribers by 2010, representing only 4.2% of the region s TV households. Our forecasts assume that the two platforms will merge probably later in 2004, though little growth is expected in 2004 as the platforms re-structure. Brazil and Mexico will command 70% of DTH subscribers by Argentina is already heavily cabled, though DTH take-up has been encouraging. Latin America s digital DTH subs will generate revenues of US$2.3 billion by Unsurprisingly, Brazil and Mexico will account for 72% of digital DTH revenues by The remaining countries will come some way behind. PPV movies will contribute 7% of this total. The average digital DTH subscriber is forecast to buy one PPV movie each month. Brazilian DTH subscribers (000) Sky DirecTV (Galaxy) Total 12/ / / / ,121 06/ ,135 06/ ,140 10/ ,139 10/ ,175 Note: These figures include commercial premises. Source: Informa Media Group 9

21 SUMMARY LATIN AMERICAN TV Revenues per subscriber are higher for digital DTH than for cable. By committing themselves to buy the equipment, digital DTH subscribers are more willing to pay for different TV services. Due to the sheer number of channels and services on offer, digital DTH operators offer an array of tiered packages to suit a variety of subscribers. Mexican DTH subs Innova/Sky Mexico Galaxy Mexico/DirecTV 1Q00 463, ,989 2Q00 500, ,839 3Q00 541, ,588 4Q00 590, ,522 1Q01 645, ,498 2Q01 675, ,580 3Q01 687, ,610 4Q01 692, ,598 1Q02 701, ,480 2Q02 723, ,146 3Q02 732,700 N/a 4Q02 705, ,000 1Q03* 779,700 N/a 2Q03* 809,000 N/a 3Q03* 826, ,000 (October) * Sky has only included commercial subscriber numbers since 1Q 2003 Sources: TV International, DirecTV, Innova DirecTV Latin America After years of trying to access the U.S. satellite market, News Corporation reached an agreement in April 2003 to buy control of General Motors Hughes Electronics unit, which includes DirecTV s DTH interests in both North and Latin America. U.S. regulators approved the deal in December Had the deal been struck a year or two earlier, the logical outcome was a merger for their rival Latin American DTH platforms - Hughes DirecTV Latin America and Sky Latin America. But that is no longer an automatic move. While News Corp s Sky platform is growing, DirecTV Latin America has been going backwards, leading to its bankruptcy filing in March 2003, which followed heavy earnings and subscriber losses. In December 2003 DirecTV Latin America filed a reorganisation plan in an effort to remove itself from Chapter 11. This was approved in January 2004 and the operator is set to move out of the Chapter 11 process in 1Q Once this process has been completed, the company s future direction should become clearer. 10

22 SUMMARY DirecTV Latin America subscribers (October 2003) Brazil 403,000 Mexico 257,000 Argentina 250,000 Venezuela 236,000 Puerto Rico 157,000 Colombia 43,000 Others 113,000 Total 1,459,000 Source: DirecTV DirecTV s problems were caused by its exposure in the problematic Venezuelan market, uncertainty over its position following the Hughes and News Corp. merger and concern over its decision to reorganise within U.S. bankruptcy laws. Meanwhile, Sky has been boosted by News Corp. having the upper-hand in the DirecTV acquisition and its long term backing for its Latin American business, which promoted confidence that was lacking in Hughes more lukewarm comments on the region. DirecTV Latin America (DLA) is owned by DirecTV Latin America Holdings, a subsidiary of Hughes Electronics Corporation; Darlene Investments, an affiliate of the Cisneros Group of Companies; and an affiliate of Grupo Clarín (GC). In connection with rights granted at the time GC became a stakeholder in DLA, Raven Media, an affiliate of GC, asserted, during the bankruptcy proceeding, that DLA was contractually obligated to repurchase Raven s 3.98% interest for US$195 million. DLA s response was to file a motion with the Bankruptcy Court to reject its obligation. In August 2003 the Bankruptcy Court granted DLA s motion. However the motion was being appealed by Raven at the beginning of The company was established in February 1995 to extend the DirecTV service to Latin America and the Caribbean. The Latin American service began broadcasting the following year and, at the beginning of 2004, it covered 97% of its target market reaching approximately 1.5 million customers in 28 countries. Revenues for DLA decreased by 19% to US$439 million for the nine months ended September 30, This compared with US$539 million for the nine months ended September 30, According to the company the decline in revenues resulted from US$55 million of revenues generated from the 2002 World Cup, a smaller subscriber base in 2003 and the 2003 devaluation of several Latin American currencies. 11

23 SUMMARY LATIN AMERICAN TV DirectTV Latin America s local operations Country* Launch date Local partner Argentina June 1998 DLA Brazil June 1996 DLA Caribbean** Jan DLA Chile Mar VTR Globalcom Colombia Apr DLA, Bavaria Costa Rica Dec Grupo Pellas, Darlene Investments Ecuador Dec Ecuavisa El Salvador Jan Teleglob Guatemala May 1997 Teleglob Honduras Jan Teleglob Mexico Nov MVS Multivision Nicaragua Dec Grupo Pellas, Darlene Investments Panama Dec Motta Group, Darlene Investments Puerto Rico July 1999 Hughes Electronics, Darlene Investments Uruguay Sept DLA Venezuela June 1996 Cisneros Group, Hughes Electronics * Also available in Guadeloupe, Guyana, Martinique, St. Martin and St. Vincent ** Caribbean includes Barbados, St. Lucia, Trinidad & Tobago Source: Informa Media Group However, revenues increased to US$155 million for 3Q03, comparing favourably with US$146 million in 3Q DLA suggested this was due to the consolidation of the local operating companies in Puerto Rico and Venezuela. Operating losses were US$74 million in the quarter compared with 3Q02 s losses of US$84 million. According to DLA, the slight improvement was down to cost cutting over the past year. This included programming cost reductions resulting from the rejection of certain contracts in connection with the Chapter 11 reorganisation, which were partially offset by reduced revenues associated with the smaller subscriber base. DirecTV Latin America financials (mil.) Jan.-Sep. 03 Jan.-Sep. 02 % change Revenues $439 $ Operating loss before depreciation and amortisation $68 $ Subscribers (Million at end September 2003) Source: Hughes For the nine-month period to September 2003 DLA lost approximately 133,000 net subscribers compared to 6,000 lost for corresponding period in DLA stated that the decline was primarily due to higher involuntary churn in Mexico and the ongoing economic turmoil as well as competitive pressures in the region. 12

24 SUMMARY Monthly ARPU for the first three-quarters of 2003 was US$32.20, a reduction of US$4.50 compared with the previous year s figure of US$ This fall was related primarily to the 2002 World Cup revenues. DirecTV Latin America estimated financials (US$ mil.) 4Q03 Prior full year 2003 Revised full year 2003 Revenues Operating loss before depreciation and amortization (20) - (40) (90) - (110) No Change Operating Loss (90) - (110) (310) - (330) No Change Source: Hughes It was the first to introduce an interactive programming guide and PPV services in Latin America and has extended this service to include more than 50 PPV channels. In 2000 the company launched its DirecTV Interactive service which offered subscribers access to banking and customer service applications, as well as video games. It now includes additional services such as and four interactive channels. In September 2003, DirecTV launched the interactive games channel Playin TV. The service also offers enhanced television viewing in certain territories where it has broadcast rights for sporting events such as the 2003 NFL season. By early 2004 interactive services were available in Argentina, Brazil, Costa Rica, Mexico, Panama, Puerto Rico and Venezuela. In November 2003 the satellite operator launched its Interactive Subscriber Channel, which, simplified viewing and programme selection. Those subscribers with interactive decoders have programme choices categorised as well as greater ease in accessing PPV and premium services. Sky Latin America Sky Latin America (SKLA) comprises three separate operations Sky Brasil, Innova in Mexico and Sky Multi-Country Partners for rest of the region. Televisa is the a majority owner of Innova with a 60% share while the Brazilian operation was majority owned by Globo. News Corp. holds a 51% equity interest in Sky Brasil and Globo has 37%. The Multi-Country division is split equally between News Corp., Televisa and Globo, with the remaining 10% owned by Liberty Media. Ownership structure (%) Company Innova Sky Brasil Rest* Televisa Globo News Corp Liberty Media *Sky services outside Brazil and Mexico are controlled by Sky Multi-Country Partners Source: Informa Media Group 13

25 SUMMARY LATIN AMERICAN TV In October 2003 Moody s Investors Service lowered its rating for US$200 million of Senior Secured Notes issued by Sky Brasil. The downgrade reflected Moody s reduced expectations with regard to the company s ability to service its debt as a stand-alone entity. It also highlighted that Sky Brasil s programming costs as a percentage of subscriber revenues remained significantly higher than the international industry average. At June 2003 Sky Brasil had US$441 million in debt, with US$209 million related to the senior secured notes and US$232 million related to PanAmSat lease annuity financing for satellite transponders. EBITDA for the six-month period ending June 30, 2003 was US$6.5 million, compared to an EBITDA deficit of US$6.3 million for the same period in Sky Latin America profits/(losses) for 12 months ended June (A$ mil.) % change Sky Brasil (56) (120) 53 Innova (37) (92) 60 Other (41) (78) 47 Total (134) (290) 54 Source: News Corp. For the year ending June 2003 losses for each of the three operations decreased. Sky Brasil, which accumulated losses of more than A$120 million in 2002 more than halved this figure in The combined losses for the three sectors decreased by 54% to A$134 million. Prospects for a profit in the current financial year are good. For the first time since its creation in October 1996, Sky Brasil reported a net profit of US$8.9 million in 1Q03, followed by a profit of US$58.2 million in 2Q03. Revenue rose to US$52 million in 2Q03, 30% higher than in 1Q03 and 10% higher than 2Q02. According to Sky Brasil, the improved financial performance is not just the result of subscriber base growth, but also the appreciation of the local currency against the U.S. dollar, the renegotiation of programming contracts and a reduction of the company s connection equipment subsidy. For the nine months ended September 2003, Sky Mexico reported net revenues of Ps2,775 million, up 4.3% compared to the first nine months of The growth was mainly due to its higher subscriber base. EBITDA for the nine-month period improved 21.2% to Ps857.1 million. This was put down to a combination of higher revenues and reduced operating expenses. Sky s Mexican operation, Innova, is the country s pay TV leader. It reported its first quarter of profitability in 2Q01, following a 48% rise in revenues in local currency terms and 14

26 SUMMARY subscriber growth at 35% compared with 2Q00. Revenues increased 5.3% to Ps931.8 million in 3Q03 compared with the same period of 2002, mainly due to the growth of its subscriber base. EBITDA for 3Q03 increased 10.8% to Ps293.6 million compared with the same period of As a result, EBITDA margin increased 150 basis points to 31.5%. Since its launch in December 1996, Sky Mexico has manoeuvred itself into a dominant DTH position, mainly through exploiting the synergies involving its strategic investors. By September 2003, Sky Mexico had 826,100 subscribers up 13% on the same month in The 3Q 2003 figure does, however, include 46,850 non-residential subscribers, which were not counted in It appears unlikely to reach its target of 1 million Mexican subscribers by end-2003, although that level could be reached by mid DSL entertainment Despite plenty of competition from cable and satellite operators, they is still potential for DSL entertainment services, though it may be some time before these services launch. By 2010, 0.5% of the region s TV households are expected to subscribe to DSL entertainment services. These 539,000 homes will generate revenues of US$215 million. DSL entertainment subs in 2010 Subs (000) Penetration (%) Revenues (US$ mil.) Rev/Sub (US$) Argentina Brazil Chile Colombia Mexico Puerto Rico Venezuela Rest of Region Total Source: Informa Media Group DTT Most governments are yet to reveal firm plans to convert terrestrial signals to DTT. However, our forecasts assume that several countries will begin DTT transmissions by the end of the decade. By 2010, 1% of the region s TV households, or 1.3 million homes, are forecast to receive DTT signals. Brazil will account for 44.5% of the 2010 total. DTT homes are classified as those receiving the signals but not subscribing to cable, satellite or DSL entertainment services. 15