* Company says Sky Brasil subscriber count at March 31
should have been 200,000 lower
* Says expected to take pretax charge of $25 mln in second
* Shares fall as much as 4 pct
By Chandni Doulatramani
June 27 Satellite TV provider DirecTV
said its Sky Brasil unit had over-reported subscriber numbers
for the last two quarters because of improper practices by some
employees, sending its shares down as much as 4 percent.
The company, which owns about 93 percent of Sky Brasil, said
on Thursday an internal investigation had found that some
employees had improperly credited subscriber accounts to reduce
or eliminate balances owed, artificially reducing attrition.
Sky Brasil is one of DirecTV's fastest growing units, and
much of the company's recent subscriber growth has come from the
expanding middle class in countries such as Brazil.
But subscriber churn has picked up as competition
intensifies and the Brazilian economy weakens, and the company
said again on Thursday that it expected to lose more customers
than it had originally estimated.
The number of Sky Brasil subscribers as of March 31 was
overstated by about 200,000, DirecTV said, while the number of
subscribers reported as of Dec. 31 should have been about
100,000 lower. ()
Sky Brasil had told Brazilian regulators that it had about 5
million subscribers at the end of December and about 5.3 million
at the end of March, DirecTV said.
DirecTV shares jumped to a decade-high last month after
better-than-expected growth in Latin America helped the company
post a strong first-quarter profit.
The company, which has a total of more than 20 million
customers, gets about 13 percent of its total revenue from Sky
DirecTV also operates in Colombia, Argentina, Venezuela,
Chile and Ecuador.
"This is not a good time to have a flag raised on anything
that pertains to Brazil, given the issues with the (weakening)
currency, and given the issues with the riots down there,"
Wunderlich Securities Inc analyst Matthew Harrigan said.
Brazilians have taken to the streets to protest against
corruption, lack of services and the billions of dollars the
country has spent building new stadiums for the soccer World Cup
and Olympics. The Brazilian real has fallen about 7 percent
against the U.S. dollar since January.
DirecTV said it expected to take a pretax charge of about
$25 million in the current quarter to recognize the increased
"Customers are looking for better deals, and the macro
environment has toughened in Brazil," said ISI Group analyst
Vijay Jayant. "People are more price conscious, so churn is
being impacted because of that."
The company said it expected to remove substantially all
subscribers who were improperly recognized as active from Sky
Brasil's subscriber base by the end of June.
DirecTV shares were down 1 percent at $60.46 in morning
trade on the Nasdaq.