DirecTV to Add to Latin America

Rupert Murdoch’s DirecTV Group Inc. said Monday that it would pay $579 million to boost its stakes in satellite television businesses in Latin America, creating a single national provider in Brazil, Mexico, Colombia and Chile.

In Brazil and Mexico, DirecTV would use News Corp.’s Sky brand to sell TV service, DirecTV spokesman Bob Marsocci said. Sky customers in Colombia, Chile and other countries would be shifted to DirecTV, the largest U.S. satellite TV firm.

Combining DirecTV and News Corp.-controlled Sky units, currently Latin America’s biggest satellite television providers, would improve their potential for profit, Fulcrum Global Partners analyst Rich Greenfield said in a note Monday. Investors may have to wait several years to see results, he said.

“DirecTV management is spinning this as a big long-term opportunity, and while we do not disagree with that view, we believe it will take years for this opportunity to bear fruit,” Greenfield said in the note, citing the “geopolitical-economic risks” of operating in Latin America.

Regulators have to approve the transactions, according to El Segundo-based DirecTV.

DirecTV also would acquire News Corp. and Liberty Media International Inc. interests in Sky Brasil and Sky Mexico. DirecTV also would buy the interests of Globo, Grupo Televisa, News Corp. and Liberty in Sky Multi-Country Partners, which sells satellite TV service in Colombia and Chile, the company said.

DirecTV would own 43% of Sky Mexico, with the rest owned by Televisa. DirecTV, News Corp. and Globo have agreed to merge DirecTV Brasil with Sky Brasil.

DirecTV would have one-time costs of about $200 million, including $100 million to move subscribers to the same set-top boxes and $100 million related to a satellite that wouldn’t be needed, Chief Executive Chase Carey said on a conference call.

The combined Latin American operations have about 3.4 million subscribers, a number that may increase to 5 million in three or four years, he said.

News Corp. controls DirecTV through its Fox Entertainment Group, which holds a 34% stake in the TV service. News Corp. owns 82% of Fox.

In addition to its stake in DirecTV, News Corp. owns 35% of London-based satellite service British Sky Broadcasting, Britain’s largest pay TV company, and fully owns Sky Italia, Italy’s only satellite TV provider.

The businesses DirecTV is acquiring will be part of its Latin America subsidiary. The unit filed for Chapter 11 in March 2003, and emerged from bankruptcy protection in February.

“Latin America is a place where a combined platform can really drive itself forward,” Carey said. “We’ll have enough of a leadership position to intelligently manage the economics and competitive strength to develop great value for DirecTV.”

In Monday’s New York Stock Exchange trading, shares of DirectTV edged up 35 cents to $17.65. News Corp.’s American shares rose 18 cents to $32.65.