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DirecTV Names Thomson Principal Supplier

5/17/2004 02:00:00 AM Eastern

The DirecTV Group and Thomson announced a definitive agreement for the long-term development and supply of digital satellite set-top boxes (STBs). As part of the transaction, Thomson said it would acquire the set-top box manufacturing assets of DirecTV unit Hughes Network Systems.

Under the five-year supply agreement, Thomson will develop and manufacture a range of new set-top box models, including DirecTV-brand high-definition and digital video recorder (DVR) receivers.

Based on the contract terms, Thomson said it expects to more than double its current annual revenue from DirecTV.

DirecTV will receive $250 million in cash from Thomson upon close of the sale of HNS' set-top box manufacturing assets. In addition, the agreement includes incentives to DirecTV based on five-year revenues and set-top box order volume to Thomson that could increase the amount paid to as much as $400 million, including the upfront amount.

The HNS set-top business assets will be added to Thomson's Video Networks Solutions Division, which provides digital equipment and services for broadcast television, cable and other network operators.

After the agreement, DirecTV Group said Thomson would be the leading supplier of its system set-top receivers, accounting for half of its needs.

The agreement is expected to close in the second quarter of 2004, pending customary regulatory reviews and approvals.

"This transaction reinforces our strategy to focus our business on DirecTV and making DirecTV the best television service available in the country," said Rômulo Pontual, DirecTV Group chief technology officer. "Thomson is the original manufacturer of DirecTV receivers and over the years has been at the forefront of developing new set-top box features and technologies."

Following the sale of the set-top box unit, HNS' principal business will consist of Direcway broadband satellite networks and services for customers worldwide, and Spaceway next generation Ka-band satellite systems planned for commercial launch in 2005 and other satellite-based communications systems, networks and equipment.

The company said HNS has over 70 percent market share in the VSAT industry.

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