February 15, 2013 / 12:35 AM / 5 years ago

UPDATE 3-DirecTV will be hurt by Venezuelan devaluation

* Will take $160 mln pre-tax charge in 2013

* Authorizes $4 billion share buyback program

* Still mulling purchase of Vivendi’s Brazil unit GVT

* Subscriber additions in Latin America beat estimates

* Fourth-quarter profit $1.55 a share, revenue $8.05 billion

* Shares fall 2.8 percent

By Liana B. Baker

Feb 14 (Reuters) - DirecTV warned that Venezuela’s recent currency devaluation will crimp its results this year and said it was still considering buying Brazilian telecom operator GVT.

The satellite TV provider also authorized a new $4 billion stock repurchase program. 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.

Chief Executive Mike White told investors DTV will complete its assessment of a possible purchase of Vivendi’s Brazil telecom unit GVT by the end of the first quarter. The company has been publicly talking about the potential deal for months.

Shares of DirecTV closed down $1.46 or 2.8 percent to $50.21, reversing gains made earlier in the session after it reported an increase in its quarterly profit and revenue due to subscriber growth in the fourth quarter.

Wunderlich Securities analyst Matthew Harrigan said that White’s comments on a possible buy of GVT may have spooked investors concerned that DTV will end up spending billions. Sources had previously told Reuters that Vivendi wanted at least 7 billion euros for the unit.

“As soon as they started talking about GVT on the call, the stock ticked down,” Harrigan said. “This would be the biggest deal ever for them.”


Much of DTV’s subscriber growth in recent years stems from Latin America, where it has been tapping into a growing middle class with more spending power in countries like Brazil. It also operates in Colombia, Argentina, Venezuela, Chile and Ecuador.

In Latin America it added 658,000 net subscribers in the fourth quarter. Analysts were expecting net additions there of 601,000, according to StreetAccount.

Last Friday, Venezuela devalued the bolivar by 32 percent, the country’s fifth devaluation in a decade. For DirecTV, which analysts estimate generates 3.5 percent of its revenue from Venezuela, this means its earnings in bolivars are now worth less when converted back to dollars.

The company 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,” the company said.

Other U.S. companies with exposure to the devaluation include Avon, Colgate-Palmolive, Energizer , Baker Hughes and Halliburton.

In the United States, DirecTV added 103,000 net subscribers in the quarter, and the CEO said he expects the company to have a net gain of U.S. subscribers in 2013.

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.

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

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