May 19 was a crushing day for Gabriel Piedra, a 27-year-old psychologist in Caracas. It wasn’t because of the scarcity of gas, food, or medication — it was the day DirecTV turned off its lights in Venezuela. For Piedra, a self-described football fanatic, losing his satellite-TV service just as the Premier League and Bundesliga were set to return only reinforced his sense of vulnerability in a country racked by hyperinflation, political instability, and, now, Covid-19.
“You’re losing your agency; you’re losing your autonomy,” he told Rest of World. “You’re losing everything.”
But for AT&T, DirecTV’s parent company, viewers like him represented an infinitesimal portion of its $181 billion annual revenues. So when it found itself ensnared in the geopolitical tensions between the United States and Venezuela, it took the opportunity to exit.
DirecTV had been the most popular pay-TV option in Venezuela. Piedra became a subscriber in 2010, when he bought a plan that included a DVR-like decoder allowing him to record that year’s World Cup, held in South Africa. Such equipment was a complete novelty for Venezuelans. Piedra, then 16, splurged with his first paycheck as a camp counselor to sign up for the service, and he would remain a loyal customer for the next ten years. DirecTV was his only way to watch international football games — and a cheap one. Until it shut down, it cost him only about $1.50 of his $200 monthly salary.
Football fans weren’t DirecTV’s only customers in Venezuela. For 10 million people undergoing severe gas shortages, 2,000,000% hyperinflation, and a nationwide coronavirus-pandemic lockdown, it provided a lifeline to the outside world. Its departure left more than a third of Venezuela’s citizens, from those living in middle-class neighborhoods to barrio dwellers, without television.
DirecTV had been present in Venezuela since 1994. By 2020, it had a 45% share of the country’s pay-TV market. With 2.2 million subscribers, the country represented almost a fifth of DirecTV’s Latin American subscription base, but its revenues were at best nonexistent, thanks to Venezuelan pricing caps and the rapid currency devaluation caused by the country’s ongoing economic crisis. In 2015, it registered financial losses related to its assets in the country of $1.1 billion, according to the Associated Press.
Historically, the administrations of Hugo Chávez and his protege Nicolás Maduro have wielded television as a political tool, shutting down TV networks that aired coverage critical of their governments, mandating the broadcast of state-run channels, and routinely barring TV providers from carrying international news channels. Even so, the gringo DirecTV remained Venezuela’s most popular television option, thanks to its superior satellite coverage, accessibility, and artificial low cost, enforced by those pricing caps.
Sensing an opportunity, in 2014, AT&T bought DirecTV in a deal worth $67 million overall in cash, stock, and debt. The telecom giant hoped the acquisition, which would allow it to bundle pay TV with broadcast and wireless services, would help it compete with Comcast, which had just purchased Time Warner Cable for $45 billion. But the deal went through just as streaming took off — poor timing, it would turn out. Soon, AT&T began bleeding pay-TV customers by the millions. Last quarter alone, it lost almost 900,000 subscribers.
Meanwhile, tensions between Washington and Caracas were flaring over issues ranging from oil and human rights to Maduro’s anti-Western demagoguery (a holdover from his predecessor). In 2014, Congress voted to sanction Venezuela for its human-rights violations, sanctions the Obama administration imposed in 2015. Following Venezuela’s disputed 2018 presidential election, which the U.S. government claimed had been rigged, the Trump administration recognized Maduro’s political rival, Juan Guaidó, as the legitimate president of Venezuela. It also stepped up its sanctions of Venezuelan entities, among them the TV network Globovisión and the state-owned oil company PdVSA. No American companies could do business with either company unless the U.S. government granted them a temporary special license.
At the same time, the Trump administration began hounding AT&T to pull out of Venezuela. In December 2019, the State Department urged the company to continue airing international channels like CNN and BBC that Maduro had ordered removed from DirecTV’s Venezuela service lineup. Then in May, Washington declined to renew DirecTV’s special license to air Globovisión, illegalizing the broadcast of a channel Venezuelan law mandated it provide.
Afterward, AT&T announced plans to leave the country altogether, noting in a statement that it was impossible to comply with the requirements of both countries at once. In retaliation, the Venezuelan government promptly arrested three local DirecTV executives on unspecified charges and seized the company’s satellite dishes and transmission centers.
For AT&T, there was little financial incentive to stay: DirecTV Latin America represented only 2.3% of DirecTV’s overall business, with Venezuela accounting for only a tiny fraction of that 2%, Jonathan Chaplin, a managing partner at the communications firm New Street Research, told Rest of World. “Within the rest of Latin America, Venezuela is a pretty tiny piece overall,” Chaplin said. “It’s not material.”
AT&T has also been unsuccessfully trying to sell DirecTV Latin America, he added, observing that DirecTV Latin America never represented a strategic part of AT&T’s interests — it just came along with the deal.
Rest of World contacted AT&T, but the company declined to add comment to its initial May statement.
DirecTV’s sudden withdrawal had significant consequences for Maduro’s propaganda machine. It relied on the carrier’s reliable signal to air its own state-run channels, Arnaldo Espinoza, a Venezuelan journalist and telecommunications expert, told Rest of World. This also helps explain why it regulated the service’s price: to ensure it stayed cheap.
For example, when Iran sent oil tankers to Venezuela in May in response to the fuel shortage, and the ships arrived despite threats from the U.S., the celebrations on the state-run Venezolana de Televisión (VTV) only lasted a little over 20 minutes instead of the usual one hour. Why? Because, Espinoza said, the tankers docked one week after DirecTV’s exit, and the government knew few would tune in.
Without DirecTV, Venezuelans were left with inferior options like cable and free-to-air antenna services, which suffer from poor infrastructure and underinvestment by the government. CANTV, the state-run dish network, is available to some 2 million people and runs mostly state channels — when it’s working, that is. Just last month, its sole satellite came back online after going dark in March.
On one side, Maduro. On the other, Trump. AT&T saw itself caught in the middle of a shouting match.
But three months later, the impossible — or what seemed impossible to many — actually happened: On August 14, Chilean investment firm Scale Capital SA announced its acquisition of DirecTV’s Venezuelan operations and that it would be restoring service immediately. The statement also said that former DirecTV Venezuela CEO Alexander Elorriaga, who had been working for a Miami-based IT company, would be taking over as president. The Venezuelan government confirmed the sale and released the three jailed DirecTV executives.
The circumstances around the takeover are still murky. It may have been a three-party deal brokered between the Maduro government, Scale Capital, and the U.S. Treasury to stay in line with the sanctions while resuming broadcast, according to Geoff Ramsey, director for Venezuela at think tank Washington Office on Latin America. “It makes sense that the [Maduro] government would try to find a workaround,” he said.
Espinoza, the Venezuelan telecoms expert, also cast doubt on the investment firm’s ability to broker the deal alone. “I don’t know if Scale has the money to pull this off, ” he told Rest of World. “But Chavistas do. AT&T just wants to unload this operation, and probing where the money comes from will not be easy.” He also said that there are still many questions regarding the deal, including that freeing the executives might have been part of the negotiations, but he didn’t speculate further.
In an emailed statement, AT&T confirmed to Rest of World that Scale launched satellite TV services in Venezuela using DirecTV’s infrastructure, which is based outside of Venezuela. The statement does not discuss any deal or acquisition but does mention an agreement under which the investment firm will be “working directly with the Venezuelan government, programmers, customers, and vendors.”
For many Venezuelans, the fine print of the deal may be of little concern. “They don’t really care about the implications,” Espinoza said, “only about the return of their favorite programs.”
The day after Scale announced the takeover, Piedra’s signal turned back on. He’s still missing a few stations — HBO, two sports channels, and even Globovisión — but it doesn’t really matter after everything that’s happened.
For Piedra, simply put, “It’s a relief.”
