DirecTV finds Sky Brasil overstated subscribers

DirecTV internal probe finds Sky Brasil was artificially increasing its subscriber base

Associated Press

NEW YORK (AP) -- Satellite television services provider DirecTV said Thursday that an internal investigation has found that Sky Brasil was artificially boosting its subscriber base during parts of 2012 and 2013.

The company anticipates taking a charge of about $25 million in the second quarter related to the matter.

DirecTV disclosed in a regulatory filing that it started an investigation into Sky Brasil Servicos Ltda. — which is part of its Latin American unit along with Pan Americana — in April. DirecTV said it found that, starting last year, some Sky Brasil workers' conduct was inconsistent with authorized policies for subscriber retention and management of subscriber turnover. This included improperly crediting various subscriber accounts to lower or eliminate balances owed, which artificially lowered subscriber turnover and raised Sky Brasil's subscriber base during portions of 2012 and 2013.

DirecTV said that the improper conduct has ended.

The company estimates that the number of Sky Brasil subscribers at 2012's end should have been about 100,000 lower than the 5.04 million reported to Brazilian telecommunications agency Agencia Nacional de Telecomunicacoes. The subscriber count as of March 31 should have been about 200,000 lower than the 5.26 million reported.

DirecTV said it expects essentially all Sky Brasil subscribers improperly recognized as being active on or later than March 31 will be taken out of the subscriber base.

The El Segundo, Calif. company said the charge will account for writing off costs and subscriber-related equipment held by those terminated. DirecTV also expects Sky Brasil's ongoing churn will be higher than it previously expected because of increased competition and economic conditions.

Shares of DirecTV shed 45 cents to $60.63 in morning trading.

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