DirecTV's $4 billion buyback helps counter Venezuela concerns

Thu Feb 14, 2013 10:03am EST

Michael White, CEO of DirecTV, speaks during the Reuters Media and Technology Summit in New York, in this June 11, 2012, file photo. REUTERS/Keith Bedford/Files

Michael White, CEO of DirecTV, speaks during the Reuters Media and Technology Summit in New York, in this June 11, 2012, file photo.

Credit: Reuters/Keith Bedford/Files

(Reuters) - DirecTV announced a $4 billion share buyback on Thursday, helping to soften the blow to investors after the satellite TV provider warned of a 2013 financial hit from Venezuela's recent currency devaluation.

Shares of DirecTV rose 3.5 percent in early trade after it also reported an increase in its quarterly profit and revenue due to subscriber growth in the fourth quarter.

While the quarter was roughly in line with his expectations Brean Capital analyst Todd Mitchell said the buyback, which is equivalent to about 12 percent of DirecTV's market value, was a big surprise compared with his expectation of $3 billion.

"That makes it the highest buyback in the cable and satellite space this year," said Mitchell, who noted that cable rivals Time Warner Cable and Comcast Corp would offer lower returns to investors this year.

Mitchell said, however, that he would like to see more details about DirecTV's exposure to the devaluation in Venezuela, which he said represents roughly 3.5 percent of DirecTV's revenue.

DirecTV said it would incur a related one-time pre-tax charge of $160 million.

The devaluation will have "an ongoing unfavorable financial impact to DirecTV's Latin America's revenues, earnings and cash flow growth related to the translation of the local currency financial statements to the new official exchange rate," DirecTV said.

Mitchell said DirecTV's ability to grow its business faster than U.S. rivals is dependent on its Latin American presence.

In the United States, DirecTV added 103,000 net subscribers. In Latin America, the greatest driver of its business, it added 658,000 net subscribers. Analysts were expecting net additions in Latin America of 601,000, according to StreetAccount.

U.S. churn, or the rate of subscriber cancellations, improved to 1.43 percent, from 1.52 percent a year ago.

Net income attributable to DirecTV rose to $942 million, or $1.55 per share, compared with $718 million, or $1.02 per share a year ago.

Revenue rose 8 percent to $8.05 billion. Analysts were expecting $8.03 billion, according to Thomson Reuters I/B/E/S.

The company also authorized a new $4 billion stock repurchase program.

In December, DirecTV Group said its service fees will rise by an average 4.5 percent in February due to increasing programming costs.

DirecTV shares rose to $53.50 in pre-market trading after closing at $51.67 on Nasdaq.

(Additional reporting by Sinead Carew; Editing by Maureen Bavdek and Nick Zieminski)