DirecTV Latin America, which owns 93 percent of Sky Brasil, 41 percent of Sky Mexico and all of Pan Americana, saw its 2012 first quarter revenues jump 33 percent to $1.49 billion. Though DirecTV was less profitable in Latin America because of the cost of signing up and providing services to the region’s subscribers, a report issued by Trefis, an analysis firm founded by MIT engineers and former Wall Street experts, predicated that the trend could change very soon.
   “While DirecTV’s U.S. business is showing signs of saturation and high competition, the Latin American growth remains solid. Although Brazil still accounts for a substantial portion of new subscriber additions, other Latin American countries are exhibiting high growth as well and attempting to catch up,” Trefis analysts wrote in the report. “The point here is that while currently it appears that DirecTV’s competition in Latin America is low, the nature of the subscriber base makes the business dynamics a little different.”
   For the past several years, satellite pay-TV operator DirecTV’s business in the United States had consistently grabbed headlines during quarterly reports season. Subscriber growth was always a given — the company benefited from the domestic success of its exclusive NFL Sunday Ticket offering and other sports packages. DirecTV’s international unit, DirecTV Latin America, had quietly turned in three years worth of growth in South Latin due to the emergence of both sports and HD programming.    Fast forward to the 2012 first fiscal quarter and DirecTV Latin America now dominates the headlines, as the division gained more than six times the amount of subscribers as its parent company to the north. How did this happen? According to several analyst reports, the answer can be found in both markets’ competitive environment.
   In total, DirecTV added 674,000 net subscribers from January 2012 through March 2012, ending the quarter with 8.5 million subscribers in Latin America and 20 million subscribers in the United States. DirecTV’s U.S. business only contributed 81,000 subscribers to the 2012 first quarter add-on tally, while DirecTV Latin America supplied the remaining 593,000 customers.
   Total gross subscriber additions reached past 1 million in Latin America — a growth of 35 percent compared with the first quarter of 2011. A substantial portion of DirecTV Latin America’s new subscribers are signing up for pre-paid services and about 65 percent of gross additions in Brazil came from middle-market segment.
   Trefis explained that the sensitivity of subscribers to price changes and changes in financial conditions are higher in Latin America than in the United States. “Thus, as competition expands and rivals provide attractive offers, DirecTV may have to deal with higher churn,” the firm said in the report. “The concept of service provider loyalty takes a back seat in emerging markets where it all revolves around a competitive price. Currently the Brazilian market is opening up to more competition as a result of recent law changes. This is going to change the competitive landscape over time.”
   DirecTV CEO Mike White now admits his company is going to invest more of its attention and resources to the Latin America by diverting a wider variety of offerings to the fast-growing region. “Our industry leading revenue and earnings growth continues to be driven by the strength of our premier brands, popularity of our differentiated product and service offerings, and an enhanced focus on achieving operational excellence through effective cost management,” White said in a statement.
   But the potential for DirecTV in Latin America extends far beyond strength of branding in larger markets. The broadcaster also is experiencing higher growth rates in markets outside of Brazil and Mexico. Trefis analysts said this was the most important positive for DirecTV to take out of the region.
   “Even though competitive landscape might change in the future, the company’s bright prospects will not vanish and instead, it will adapt itself according to the changing conditions,” Trefis said in the report. “Latin America will continue to be the engine of DirecTV’s growth.”