Latin America’s Rising TV Tide

While the U.S. economy teeters nervously between a full-throated recovery and recessionary backsliding, Latin America has been enjoying more temperate economic climes and the region’s pay TV providers are basking in the sun.

Satellite TV firm DirecTV’s Latin American division had a blockbuster second quarter, adding roughly 590,000 subscribers, bringing its total subscriber count into the eight million range.

DirecTV Latin America now contributes a quarter of the company’s total revenue and the company has big ambitions for its Latin American arm. On a conference call with analysts, DirecTV Latin America CEO Bruce Churchill said the goal was to double subscribers in five years (hitting 16 million) with annual revenue topping $10 billion. Warren Buffet, the dean of American investing, evidently likes what he sees: he’s been gobbling up shares of DirecTV of late.

Satellite TV is well positioned to profit from the growing Latin American economies, particularly in Brazil and Colombia. Pay TV penetration is relatively low and the infrastructure for cable and IPTV services isn’t robust yet, leaving satellite providers as often the only game in town.  Only 22% of Brazilian households have pay TV services and Brazil accounts for the largest chunk of DirecTV’s Latin American business, with roughly 3.8 million subscribers. There appears to be plenty of headroom for further growth.

Pay TV provider Grupo Televisa has also enjoyed growth. The firm notched a growth rate of 23% for its pay TV revenues in the last quarter of 2011.

Then there’s Sundaytv – a new Internet video-on-demand play from the web portal Terra available in Argentina, Brazil, Chile, Colombia, Mexico and Peru. After just three weeks, the service has accumulated 100,000 paying subscribers and half a million registered users.

Overall, Latin American pay TV penetration is estimated to be below 25%, whereas the U.S. is nearly topped out at over 90%. Even if the macro-economic climate reverses for a time, as it inevitably will, it’s likely that the steady penetration of pay TV services in the region will continue and will rain down profits on those services well positioned to take advantage.