After initiating an internal investigation in April, DIRECTV (NASDAQ:DTV) has determined that "certain employees" of Sky Brasil, part of its Latin American business unit, had "improperly [credited] various subscriber accounts to reduce or eliminate balances owed by such subscribers," which artificially increased the number of customers and reduced churn, the company stated in an SEC filing today.
According to DIRECTV, the inaccurate reporting to the Brazilian regulatory agency Anatel resulted in overstating subscriber numbers by approximately 100,000 on Dec. 31, 2012, and an estimated 200,000 on March 31, 2013. The numbers it had reported for those two dates were 5.04 million and 5.26 million, respectively.
While its internal investigation continues, DIRECTV said it expects the incorrect subscriber numbers will "churn out" by the end of the second quarter of 2013.
DIRECTV says it will take a $25 million charge in Q2 as a result of the improper subscriber reporting, to account for "the write-off of capitalized installation costs and subscriber related equipment held by the terminated subscribers."
Fool contributor Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends DirecTV. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.