DirecTV (DTV) is the world's leading provider of digital television entertainment services. Through its subsidiaries and affiliated companies in the U.S., Brazil, Mexico and other countries in Latin America, DIRECTV provides digital television service to 20.11 million customers in the U.S. and 16.32 million customers in Latin America. The company's strategy is focused on high-value U.S. customers and rapid growth in Latin America.
DirecTV has a competitive advantage in Latin America because the cable infrastructure is undeveloped but DirecTV's satellite operations mean it can provide top-quality television. Essentially Satellite technology is easier to roll out once you've built your broadcast center, sent up your satellites and established local call centers. Additionally, Latin America consists of different countries and jurisdictions, and it is difficult for cable companies to dominate across the continent.
Latin America presents DirecTV with the opportunity to add 1 million to 2 million more customers per year over the next five years. There are 150 million more people in Latin America than the U.S., penetration of cable and satellite in South America is only 25% of the population compared to 90% or more in North America, there is a growing middle class and South America hosts the World Cup and the Olympics in 2014 and 2016. All this means there is a huge opportunity with DirecTV in a prime position to benefit.
Consensus earnings on Yahoo Finance point to annual growth of more than 20% over the next five years, a view that seems to be shared by Warren Buffett, who has a holding of almost 4%. Priced at 13.53 times historic earnings, other investors may yet choose to jump on board.
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