DirecTV Declines After Venezuela Currency Hurts Forecast

DirecTV, the largest U.S. satellite-TV provider, fell the most in more than four months after the company said it’s taking a $160 million charge this quarter to account for Venezuela’s decision to devalue its currency.

The South American country announced it was devaluing the bolivar 32 percent on Feb. 8. While DirecTV Chief Executive Officer Mike White said he was optimistic about Venezuela as a long-term market, the move means the company won’t see growth in its Latin American operating profit this year, excluding depreciation and amortization. Vijay Jayant, an analyst at ISI Group in New York, had estimated a 6 percent gain.

DirecTV Chief Financial Officer Pat Doyle also said the company’s new $4 billion share repurchase program may extend into next year. The hint that DirecTV wouldn’t necessarily make all of the buybacks in 2013 may have disappointed investors, Shing Yin, an analyst at Guggenheim Securities LLC in New York, said in an interview.

“The Latin American guidance was disappointing, and the lack of clarity on the buyback just added to that,” Yin said.

DirecTV fell 2.8 percent to $50.21, its largest one-day decline since October, after rising as much as 3.4 percent earlier in the day. Investors were “excited” about the buyback until hearing during the call that DirecTV may not use it all this year, Yin said.

Fourth-quarter Earnings

White reiterated that DirecTV is still evaluating acquiring Vivendi SA’s GVT Internet and phone unit in Brazil. The company’s buyback plans could change if DirecTV buys GVT, Doyle said. DirecTV is competing against a private-equity group bid for GVT, according to people with knowledge of the matter.

DirecTV reported a 31 percent gain in fourth-quarter profit after adding a record number of Latin American customers and selling an 18 percent stake in the Game Show Network.

Net income rose to $942 million, or $1.55 a share, from $718 million, or $1.02, a year earlier, the El Segundo, California-based company said in a statement. The Game Show Network transaction helped fuel profit with a $111 million pretax gain. Sales rose 7.9 percent to $8.05 billion, topping the average estimate of $8.03 billion compiled by Bloomberg.

DirecTV added 658,000 customers in Latin America, more than the 588,000 estimate of 11 analysts surveyed by Bloomberg, for a total of 10.3 million. DirecTV is increasing its subscriber base in Latin America by going after middle-class customers, said Paul Sweeney, an analyst at Bloomberg Industries.

‘Managing the Process’

“The company has to balance stronger subscriber growth with lower revenue per user and higher churn, and the fourth-quarter results suggest they are managing the process quite well,” Sweeney said.

Latin American churn -- the monthly turnover among subscribers -- rose to 1.75 percent from 1.65 percent. Average revenue per user declined 7.6 percent to $55.84, though that was higher than the average analyst estimate of $54.83.

The company added 103,000 U.S. subscribers last quarter, ending with 20.1 million. White announced U.S. net additions would be around 100,000 last month.

Average revenue per user in the U.S. rose 3.7 percent to $105.15, and churn dropped to 1.43 percent from 1.52 percent a year earlier.

DirecTV estimated that 2013 U.S. capital expenditure spending will be about $2 billion, a “peak year,” Doyle said. The increased spending will go toward improving DirecTV’s Internet streaming options, improving the user experience and upgrading the company’s campus in El Segundo, he said.

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