DIRECTV (1.8%) (DTV – $86.70 – NASDAQ) is the largest pay television provider in the world, with over twenty million subscribers in the U.S. and over twelve million throughout Latin America. Originally part of General Motors (less than 0.1%), DTV used its technological advantage, focus on high income customers, recognition of the necessity for superior customer service, and clever (Sunday Ticket) participation in exclusive sports programming to cement its position in the U.S. The company used essentially the same strategy in Latin America, where it is benefiting from the growth of the middle class in countries such as Brazil and Colombia. Atop a superior operating business, DTV has layered a capital structure that maximizes equity returns. The company has used modest leverage to repurchase stock, in the process cutting its shares outstanding by more than half over the last five years. Long of interest to its telecom distribution partners, AT&T (less than 0.1%) agreed to acquire the company in April 2014 for $95 per share in cash and stock. We expect the transaction to be approved and close in the first half of 2015.
From Mario Gabelli (Trades, Portfolio)’s Asset Fund Q4 2014 Commentary.
