Monday, January 27, 2014

DirecTV Said to Be Near Renewal of Deal for ‘NFL Sunday Ticket’- 12/17/2013

http://www.bloomberg.com/news/2013-12-12/directv-said-near-renewal-of-deal-to-carry-nfl-sunday-ticket-.html

5 comments:

  1. FINANCIALS-
    FCF:
    Directv 372 M
    DISH Network 82 M
    Time Warner Cable 425 M
    Comcast 2 B

    ROA-
    Directv 14.51%
    DISH Network 4%
    Time Warner Cable 3.92%
    Comcast 4.03%

    ROE-
    Directv -51.1%
    DISH Network 246%
    Time Warner Cable 27.38%
    Comcast 13%

    The ROE for Directv in June 2011 is -2215%

    1. Largest businesses that move the needle
    Directv US (20.2M subscribers and 24.7B revenue) and Directv Latin America (17.8M subscribers and 6.8B revenue). Under Directv Latin America, they have 93% owned SKY Brasil; 100% owned PanAmericana; 41% owned SKY Mexico.

    2. Business that don’t really count as much
    Relatively Small Business Segments are sports networks, followed by Game Show Network.

    3. Profitable business unit
    Besides the US market, profits that are growing fast in Latin America. Directv achieved a major milestone, surpassing 17 million total customers in Brazil, PanAmericana and Mexico.

    4. Those profitable business unit will continue to do well
    - Argentina: In terms of product mix, approximately 60% of the gross additions in PanAmericana were prepayments which give Directv a huge bargaining power.
    - Sky brand: (59% owned by Televisa and 41% owned by Directv) delivered another strong quarter, adding 233,000 net subscribers in the quarter.

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  2. 4 Segments:

    Revenue:
    • DirecTV U.S 78.1% increased by 6.23% in 2012 compared 2011
    • DirectTV Latin America 21% 22% increased in 2012
    o Sky Brasil 11.8%
    o Pan Americana
    • Sports Networks 0.9%

    Profit:
    • DirecTV U.S 81.7% increased by 12.2% in 2012 compared 2011
    • DirectTV Latin America 18.7% only 4.26% increased in 2012 (operating cost such as infrastructure)

    FCF Cash Flow:
    • 2012: 2285; 2011:2015; 2010: 2790
    • Cost of Satellites: big increasing costs on satellites: 389,246,113, in 2011 117% increase, in 2012, 58% increase.
    • Increasing cost of equipment in 2011 and 2012 because of expanding

    Strengths:
    • Strong infrastructure
    • Robust brand name and distribution activities
    • Strong market position

    Risk:
    • Debt burden (interest 781m, 16% of the net income)
    • Concentrated operation ( too depend on DTH technology, too depend on U.S)
    • Theft of Digital content ( easily copied by others)
    • Satellites failure might adversely affect the company revenue

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  3. DirecTV: a direct broadcast satellite operator and the largest satellite TV provider in the US

    2 major segments:
    -DirecTV U.S.: 78% of total revenues in Q3 2013, 78% in 2012, 80% in 2011, 84% in 2010.
    80% of operating profits in Q3 2013, 82% in 2012
    -DirecTV Latin America: 21% of total revenues in Q3 2013, 21% in 2012, 19% in 2011, 15% in 2010.
    21% of operating profits in Q3 2013, 19% in 2012, 20% in 2011, 16% in 2010.
    Total Revenue: 11% CAGR, 29.7 billion 2012

    Subscribers:
    -Cumulative subscribers: 35.6 million 2012,12% CAGR
    -US subscribers: 20.1 million 2012, 2.3% CAGR
    -Latin America subscribers increased by 30% in 2012, revenue increased by 20%
    -US average revenue per user: $97 in 2012, 4% increased from 2011
    -In Q3, the company get 0.14 million US new users, the biggest quarter increase since 2011.

    Financials:
    -NI: 24% increased in Q3 2013.
    -EPS: $4.58 in 2012, 41% CAGR from 2010 to 2012, 40% increased in Q3 2013.
    -Free cash flow: 2.3 billion in 2012, 2.0 billion in 2011, increased by 15%

    Market share in the US:
    -DirecTV: 20% of pay-TV subscribers
    -Dish TV: 14%
    -Cable TV (such as Comcast and Time Warner Cable): 57%
    -Telecommunication companies (such as AT&T and Verizon): 9%

    Risk:
    -Loss of video subscribers in US market.
    -High acquisition cost of new subscribers, including advertising, retailer incentives, equipment subsidies and installation.
    -Latin market subscribers increase in Q3 is lower than expectation.

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  4. DirecTV
    Segments Structure
    • DIRECTV U.S. $23b; 78.1%; 18% (operating profit margin);
    • DIRECTV Latin American $6b; 21%; 15.3% (operating profit margin);
    • Sport Networks, Eliminations and Others $261m; 0.9%
    • Both revenue and profit keeps increasing for the two main segments in the recent three years

    Latin American Segment
    • Economic development across the region
    • Low cost and high margin. Latin ['lætn] American Segment EBITA margin 30%; U.S. Segment EBITA margin less than 24%;
    • Lower level of competition. A few cable and fixed-line company
    • Capital expenditure increase 31% (2011)
    • High growth rate. 22.5% (2012); 42% (2011); 6% (U.S. segment)
    • Accounting for 20% of sales in 2012, up from 15% in 2010.
    U.S. Segment
    • Focus on profitability rather than growth
    • Focus on rural area
    Free Cash Flow
    • Free cash flow $2,285(2012) ; $2,015(2011) ; $2,790(2010)
    • Increase of 14% in 2012; Decrease of 28% in 2011 because of 31% increase in Capex

    Favorable cases
    • National-wide service and brand
    • High quality TV programming; Exclusive
    • High revenue generated per customer; $90/customer; $70/cable customer
    • Lower cost in building satellite TV network than fixed-line TV network
    • Growth in Latin American market
    Unfavorable cases
    • Growth fueled in part by discounting.
    • The threat of Internet distribution
    • Fierce competition.
    • Higher spending on content, facilities and equipment

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  5. CORPORATE OVERVIEW

    3 Business Segments (Revenue %, Operating profit margin) 2012

    DTV U.S. 78% 18%
    DTV Latin American (Sky Brasil & PanAmericana) 21%, 15%
    Sports Networks, Eliminations and Other 1% N/A

    DTV U.S. (Core Business)
    - Revenue has been generated by increases in the total number of subscribers and ARPU growth
    - DTV is the larger of the two satellite TV providers (vs. DISH), and the second largest pay TV provider (versus Comcast). The satellite TV providers account for about 33% of the U.S. pay TV market

    DTV Latin (Emerging Business)
    - Pay TV penetration and relatively favorable macroeconomic and demographic trends continue to provide a substantial opportunity for growth

    FINANCIAL TRENDS

    - Free cash flow is 2,285 million
    - FCF is used to invest in capital and repurchase shares.
    - Capital Expenditure focus on subscriber leased equipment, satellite and other infrastructure primarily at Latin America.
    - Sep 30, 2013, DTV had total debt $19.2 billion, and $1.6 billion of cash
    - The company has consistently executed its share repurchase program -- having repurchased nearly $29 billion since 2006;

    SUB-INDUSTRY OUTLOOK
    - Concerns of changing consumer behavior for subscriptions for entertainment and communications services
    - Increased pressures on pay-TV subscriber growth, amid increased popularity of broadband video outlets such as Netflix and Hulu, as well as the so-called TV Everywhere services (e.g., HBO GO)
    - Continued penetration of high-definition (HD), video-on-demand (VOD) and digital video recorders (DVRs)

    INVESTMENT RATIONAL/RISK
    PRO
    - LatAm's emerging middle class in a highly underpenetrated pay TV market
    - Further stabilization of the core U.S. business
    - Key product initiatives and nascent opportunities (e.g. targeted advertising, VOD/PPV, commercial services)
    - DTV's strong financial capacity
    CON
    - U.S. pay TV competition from bundled offerings (and online video services);
    - Dilutive acquisitions;
    - Latin American economic and political risks;

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