DirecTV reports subs fraud by Brazil staff

DirecTV says that it has over-reported its overall subscriber numbers for its Latin America unit at the end of March, by about 200,000. DirecTV says some of its Sky Brazil employees had improperly credited subscriber accounts and thereby made the accounts active and reduced churn.

It is going to prove an expensive mistake. DirecTV, in a company regulatory filing, says it will take a $25 million (pretax) charge in Q2 in order to recognise and adjust for the increased churn.

An investigation has shown that the actual number of subs, as at December 31st last year, should have been about 100,000 lower than the number reported to the Brazilian regulator. The error grew to about 200,000 by March 31st.

Sky Brazil had told the regulator that it had about 5 million subs at the end of last year, and 5.3 million as at March 31st.  DirecTV owns 93 per cent of the Brazilian operation.

The embarrassment is compounded by DirecTV’s shares growing to a record high on the back of the broadcaster’s success in Latin America and helped by better than expected growth in the region.

A complete clean up will now take place and the churn numbers re-stated by the end of this month.

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