direc tv group The DIRECTV Group, Inc. at Merrill Lynch Media Fall Preview
1. Merrill Lynch Media & Entertainment
Conference
September 17th 2007
Mike Palkovic
CFO, DIRECTV
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2. Cautionary Statement
This presentation may include or incorporate by reference certain statements that we believe are, or
may be considered to be, “forward-looking statements” within the meaning of various provisions of the
Securities Act of 1933 and of the Securities Exchange Act of 1934. These forward-looking statements
generally can be identified by use of statements that include phrases such as “believe,” “expect,”
“estimate,” “anticipate,” “intend,” “plan,” “foresee,” “project” or other similar words or phrases. Similarly,
statements that describe our objectives, plans or goals also are forward-looking statements. All of
these forward-looking statements are subject to certain risks and uncertainties that could cause actual
results to differ materially from historical results or from those expressed or implied by the relevant
forward-looking statement. Such risks and uncertainties include, but are not limited to: economic
conditions; product demand and market acceptance; ability to simplify aspects of our business model;
improve customer service; create new and desirable programming content and interactive features;
achieve anticipated economies of scale; government action; local political or economic developments
in or affecting countries where we have operations, including political, economic and social
uncertainties in many Latin American countries in which DTVLA operates; foreign currency exchange
rates; competition; the outcome of legal proceedings; ability to achieve cost reductions; ability to renew
programming contracts under favorable terms; technological risk; limitations on access to distribution
channels; the success and timeliness of satellite launches; in-orbit performance of satellites, including
technical anomalies; loss of uninsured satellites; theft of satellite programming signals; and our ability
to access capital to maintain our financial flexibility; and we may face other risks described from time
to time in periodic reports filed by us with the SEC.
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3. Non-GAAP Financials
This presentation includes financial measures that are not determined in accordance with accounting
principles generally accepted in the United States of America, or GAAP, such as Operating Profit
before Depreciation and Amortization, Free Cash Flow, Pre-SAC margin and Cash Flow before
Interest and Taxes. These financial measures should be used in conjunction with other GAAP financial
measures and are not presented as an alternative measure of operating results, as determined in
accordance with GAAP. DIRECTV management uses these measures to evaluate the profitability of
DIRECTV U.S.’ subscriber base for the purpose of allocating resources to discretionary activities such
as adding new subscribers, upgrading and retaining existing subscribers and for capital
expenditures. A reconciliation of these measures to the nearest GAAP measure is posted on our
website.
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4. Solid Year-to-Date Results
YTD YTD
DIRECTV U.S. June June Change
2006 2007
Revenue $6.51B $7.27B +12%
Operating Profit Before
$1.52B $1.93B +27%
Depreciation & Amortization
Cash Flow Before Interest
$661M $651M (2)%
and Taxes
ARPU $70.73 $74.96 +6%
SAC $656 $677 +3%
Monthly Churn 1.52% 1.51% (1) basis pt.
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5. Strong Subscriber Growth
DIRECTV Share of U.S Industry Net Subscriber Growth
20% Gross Adds
FY YTD
2007
2006
DIRECTV 820K 363K
Cable ramps-
up VoIP
15% Comcast 80 (20)
Cable ramps-up
Time Warner 50 (10)
High Definition
Cable ramps-up
Cox 40 20
Video-on-Demand
10% Charter (70) (10)
Cable ramps-up
Cablevision 100 10
Broadband
Mediacom (40) (40)
Cable 160K (50)K
5%
2001 2002 2003 2004 2005 2006
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6. Increasing Sales of HD and DVR Services
Year End 2006
Year End 2005
DIRECTV U.S. Subscriber
Penetration
Advanced Services
Basic Services
Year End 2007E
Year End 2008E
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8. Continued Strong ARPU Growth
6.0% YTD ARPU Increase
HD/DVR Fees
(~1%)
Price Increase
(~4%)
Lease Fees
Ad Sales
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9. Stabilizing SAC
$642 $642
Marketing
Commission/ Other
Installation
Hardware
2005 2006 2007E
Increasing HD/DVR Sales Are Mostly Offset By Significant Box Cost Reductions
$500
Box Costs
27%
14%
HD/DVR Sales
(% of Gross Adds)
$0
Q1 '06 Q1 '07 Q1 '08E
2005 2006 2007E HD-DVR HD 9
Note: Subscriber Acquisition Costs (SAC) Include Capitalized Set-Top Box Costs
10. Managing Upgrade/Retention Costs
Upgrade/Retention Costs as a % of Revenue*
9% 9% 9%
MPEG-4
$1.3B Swaps
$1.1B
Other
HD/DVRs
2005 2006 2007E
Annual Cost/Sub*
HD/DVRs $23 $37 $48
All Other $52 $44 $38
Total $75 $81 $86
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* Excludes MPEG-4 HD swap costs of $75M in 2006 and approximately $200M in 2007
Note: All Upgrade/Retention Costs Include Capitalized Set-Top Box Costs
11. DIRECTV U.S. Capital Expenditures
Expect Significant Reduction in Satellite/Maintenance
CapEx After Launch of D11/D12
Satellites Maintenance
$.7B $.7B
2005 2006 2007E
Additional CapEx
Set-Top Boxes* 0 $1.1B
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*Lease program began in March 2006
12. U.S. High-Definition TV Forecast
Homes with HD Televisions Homes with HD Service
44%
62%
% of U.S. TV Homes 57% 37%
% of U.S. TV Homes
49%
28%
72M 51M
66M
36%
42M
19%
25% 55M
12% 32M
40M
28M 21M
13M
2006 2007E 2008E 2009E 2010E
2006 2007E 2008E 2009E 2010E
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Source: Compilation of 3rd party research, company estimates
13. HD Channel Launch 1st Half 2008:
Up to 150 Channels
Year end 2007:
Subscribers
Up to 100 Channels
can also
receive:
Today:
~10 Channels
More Channel
Announcements
To Come
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15. Broadband Partnerships
Partner Technology Coverage Today
Verizon DSL 44 Markets Mostly in N.E.
AT&T/BellSouth DSL 42 Markets Mostly in S.E.
Qwest DSL 38 Markets Mostly in Central U.S.
Earthlink DSL National
Earthlink Wi-Fi Anaheim, Philadelphia, New Orleans
WildBlue Satellite Continental U.S.
Clearwire Wi-Max 51 Markets Throughout the U.S.
Current BPL Dallas/Ft. Worth
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16. DIRECTV Latin America Overview
Region-Wide Revenues of $2.4B and 4.5M Subscribers
Sky Mexico
(DIRECTV= 41%; Televisa=59%)
• 22M TV HHs
• 27% Pay TV Penetration
• 1.5M Sky Subscribers
• $42 ARPU; 1.3% Monthly Churn
Sky Brazil
(DIRECTV=74%; Globo=26%)
• 50M TV HHs
PanAmericana
• 9% Pay TV Penetration
(DIRECTV=100%)
• 1.4M Sky Subscribers
• 34M TV HHs
• $55 ARPU; 1.3% Monthly Churn
• 28% Pay TV Penetration
• 1.5M DIRECTV Subscribers
• $43 ARPU; 1.4% Monthly Churn
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17. DIRECTV Latin America
A Great Opportunity to Unlock Value
Sky Brazil 2006 2007E
Subscribers (K) 1,332 1,487
Revenue ($M) 417 900
DLA
2006 2007E 2009E Operating Profit
Consolidated 153 250
Before D&A ($M)
Subscribers (K) 2,711 3,100 4,000 Cash Flow before
62 180
Interest & Taxes ($M)
Revenue ($M) 1,013 1,600 2,000
Operating Profit PanAmericana 2006 2007E
244 350 600
Before D&A ($M)
Subscribers (K) 1,286 1,560
Cash Flow before
12 165 400
Interest & Taxes ($M) Revenue ($M) 569 720
Operating Profit
101 135
Before D&A ($M)
Cash Flow before
47 30
Interest & Taxes ($M)
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Note: DIRECTV owns 100% of PanAmerica and 74% of Sky Brazil. DIRECTV also
owns 41% of Sky Mexico, which is not consolidated.
18. Strong Balance Sheet
• $1.4.B net debt position as of 2Q 2007:
Total Debt $3.4B
Cash and Short Term Inv. $2.0B
Net Debt $1.4B
• As of August 9, 2007, we repurchased
approximately 228M shares for $4.0B
– New stock buyback program authorized for an
additional $1B in August, 2007
• Current credit rating provides significant
borrowing capacity
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19. Summary
DIRECTV is poised for significant
cash flow growth
• Leading digital multichannel TV service provider
– 100% digital platform
– Unique and exclusive programming
– New products/services expected to further differentiate
• Strong revenue, OPBD&A and subscriber growth
– Increasing margins due to cost controls and operating leverage
• Significant upside potential at DIRECTV Latin America
• Strong balance sheet with substantial liquidity
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