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Wall Street is scrutinizing Hughes and its DirecTV unit about previous methods they used for counting subscribers for the satellite TV service.

The Wall Street Journal reported Friday on DirecTV's change in reporting subscribers, in which the company had included pending subscribers in its cumulative subscriber base. Pending subscribers are those who have purchased equipment and have had all of the required customer information entered into DirecTV's billing system, but have not yet activated service.

With the elimination of pending subscribers from the total number, DirecTV was forced to reduce its overall customer count by more than 360,000. The restatement took the satellite TV service's total to 10.56 million as of March 31.

In the Journal article, Mike Palkovic, DirecTV's chief financial officer, admitted that the subscriber statistics "may not have been perfect." But he stressed, "I don't believe we misled any investors."

William Kidd of Lehman Brothers said that in a time of heightened sensitivity concerning company transparency and disclosure, "it is not surprising that the market seemed a bit disappointed" by the subscriber restatement.

"The bottom line is that most would agree that a sub isn't a sub unless it's a paying sub, which is why the market has some room to gripe," Kidd said.

The change in reporting subscribers has no impact on DirecTV's past or future revenues, EBITDA or cash flow, executives stressed last week.

DirecTV spokesman Bob Marsocci added that the pending subscriber numbers have been essentially flat for the past two years. When DirecTV's subscriber numbers included pending accounts, it distorted ARPU (average revenue per subscriber). Thus, the key metric was understated, Marsocci said.

The change on policy also simplified the tracking and understanding of customer counts, and is consistent with the way subscribers are reported by the rest of the business, Marsocci said.

From SkyReport (Used with permission)
 
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With 600 to 800,000 unpaying subscribers in Canada + countless Americans who bought DTV/ATSC units for OTA digital only; DTV has been reporting phony subs totals for years
 
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