SEC Probing DirecTV Transactions

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DirecTV Group Inc. said in a securities filing late Friday that it is subject to a Securities and Exchange Commission review into the accounting treatment of a $1.47 billion asset write-down last year, but most analysts did not believe the informal inquiry would have a long-term effect on the company.

DirecTV said in the filing -- a registration statement that would allow a pension fund of General Motors Corp. to sell about $2 billion of DirecTV stock -- that the SEC was looking into three transactions (with the National Rural Telecommunications Cooperative, Pegasus Communications Corp. and Thomson Multimedia SA) in the second quarter of last year, as well as the $1.47 billion write-down of certain satellite assets connected with its scuttled Spaceway program in the third quarter.

Last June, DirecTV ended an agreement that allowed the NRTC to market its service exclusively in rural markets, and in August, the direct-broadcast satellite provider purchased some subscribers from Pegasus for about $900 million.

In May, DirecTV entered into a deal to sell its set-top-box business to Thomson for $250 million. As part of that deal, DirecTV agreed to buy set-tops from Thomson over several years.

According to the filing, DirecTV said it was responding to the SEC’s request for additional information.

“Although the outcome is uncertain, we could be required to change the reported accounting treatment for one or more of these items, which could also adversely affect future results, including potentially increasing depreciation or amortization,” DirecTV said in the filing.

The write-down was associated with DirecTV’s plan, announced in September, to shelve the Spaceway high-speed-data-over-satellite initiative and instead use the satellites earmarked for that program to deliver HDTV signals.

At the time, DirecTV said that because the satellites would be used for a purpose other than what they were originally intended, the write-down was required.

That write-down had no effect on revenue, but it swung the DBS provider to a $1 billion loss in the third quarter.

For that reason, most analysts don’t see a problem with the SEC review.

“None of the inquiries appears to focus on revenue recognition or operating items,” Citigroup Smith Barney analyst Niraj Gupta wrote in a report. “As such, we do not believe the inquiries will have a material impact on the perceived value of DirecTV.”

DirecTV stock was priced at $15.91 per share in 4 p.m. trading Monday, down 19 cents each.

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