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What future for DirecTV’s LatAm pay-TV operations?

AT&T’s purchase of DirecTV was approved last week in the US market with the main aim of consolidating its position in the domestic broadband market and as a provider of integrated communication services, states a report by global business intelligence firm Dataxis.

DirecTV is the second largest pay-TV operator in the US – with 20.35 million subscribers end-2014, and second largest pay-TV operator in Latin America (through Sky Brasil and DirecTV Panamericana) – with 12.5 million subscribers and revenues of $7 billion in 2014.

DirecTV is also a minority shareholder in Sky Mexico – a DTH operator run by Televisa. The three platforms together make DirecTV the largest pay-TV operator in the region by number of subscribers (19.25 million – 32.8 per cent regional share) and income ($ 8.7 billion). Dataxis forecasts that the three operations of DirecTV in Latin America will surpass the US in terms of total customers this year.

However, DirecTV only has a marginal presence in the Latin American telecoms market via fixed wireless access platforms in Argentina and Brazil (160,500 connections), with licenses to operate in Colombia, Peru and Venezuela. In fact, DirecTV is the only Top-10 player in the region that does not have a telecoms arm in its range of services – entering partnerships with telecoms operators to offer triple-play services in Argentina and Colombia.

Dataxis believes AT&T’s control of DirecTV’s Latin American business was merely a consequence of the deal in the US rather than an actual objective and, although AT&T executives have voiced enthusiasm for the Latin American assets, a number of scenarios could now play out:

– AT&T maintains the status quo and keeps DirecTV as a focused pay-TV player.

– AT&T replicate its US strategy with the purchase of telecom assets in Latin America to offer multiple services.

– AT&T sells the pay-TV businesses in Latin America.

At the end of 2014, AT&T announced the acquisition of the mobile assets of Iusacell and Nextel in Mexico. However, the deal will not allow it to form an immediate association with Sky Mexico and, this year, Televisa has actually re-invested in the Mexican mobile market as an MVNO on the Telcel network (America Movil). In the rest of Latin America, AT&T does not have telecommunications assets for the mass market.

Historically, AT&T has not been aggressive in international expansion, which leads us to believe that increasing its footprint outside the US through DirecTV was not one of its medium-term objective. We also believe DirecTV cannot remain outside of the trend towards convergence in Latin America.

In the event that AT&T would look to sell DirecTV Latin America, Dataxis has identified several companies that could be interested various assets, including America Movil, Altice, Liberty Global and Telefonica, and a few others at a national level.

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