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SEC Asks DirecTV to Explain Transactions

By Chitra Somayaji
Bloomberg News
Sunday, January 23, 2005; Page A14

DirecTV Group Inc., the largest U.S. satellite-television operator, said the Securities and Exchange Commission has asked how the company accounted for some transactions.

The SEC is seeking details on the accounting agreements with Pegasus Communications Corp., the National Rural Telecommunications Cooperative and Thomson SA in the second quarter of 2004, DirecTV said in a regulatory filing Friday. The SEC is also investigating the $1.47 billion write-down of its Spaceway satellites in the third quarter.

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DirecTV, of El Segundo, Calif., may be required to change how it accounts for those transactions, which might increase its depreciation and amortization expenses, the company said in the filing. It did not provide more details.

"This is not an investigation, it's a routine inquiry," DirecTV spokesman Robert A. Marsocci said. "We're providing them with the information they requested."

The SEC inquiry was reported by Reuters .

DirecTV ended an agreement last year that gave the NRTC exclusive rights to market its service in some rural areas. In August it acquired subscribers from NRTC and Pegasus, which had also marketed DirecTV's service under a contract with the cooperative.

The two acquisitions added about 1.4 million subscribers, boosting DirecTV's customers to 13.5 million in the third quarter.

DirecTV wrote down the value of its Spaceway satellites after the company decided to use two of the satellites to provide customers with additional high-definition TV programming, instead of Internet access, as had been planned. Accounting rules required DirecTV to consider writing down the satellites' value after changing plans for their use, the company said in a regulatory filing in October.

Thomson, a French provider of digital TV set-top boxes, agreed in May to pay about $400 million to DirecTV for its set-top box manufacturing assets.


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