By Liana B. Baker
(Reuters) - Satellite TV provider DirecTV added fewer U.S. subscribers than expected and saw higher programming costs in the United States which hurt its operating margins during the first quarter.
Shares were down 79 cents, or 1.6 percent, to $47.11 in late morning trade on Tuesday.
DirecTV added 81,000 new U.S. subscribers, missing analysts' average forecast of 92,000, according to StreetAccount data. The company said in a statement that in the United States it focused on retaining its "higher quality subscribers" and used stricter credit policies with new customers.
Nomura analyst Mike McCormack called the results a "mixed bag" and said they deepen his concerns about the health of the company's U.S. operations. In a research note he wrote that "investors should question the operational strategy" of DirecTV.
"We see few alternatives to alleviate cost pressures," he wrote.
DirecTV said that its operating margins declined from 34.5 percent to 31.5 percent from a year ago partly due to higher programming costs. Media companies are raising their rates faster than operators such as DirecTV can pass them along to customers.
DirecTV's churn rate, or the rate of cancellations, fell to 1.44 percent, an improvement from 1.52 percent a year ago and ahead of estimates. It had 19.97 million subscribers at the end of the quarter.
In Latin America, it added 593,000 new subscribers, which beat analysts' estimates of 543,000.
Much of the satellite TV provider's subscriber growth has been in Latin America, where it has been tapping into a middle class with more spending power in countries like Brazil. It also operates in Colombia, Argentina, Venezuela, Chile and Ecuador.
"Their Latin American business continues to be on fire," said Brean Murray analyst Todd Mitchell.
The company also generated 3.6 percent more revenue per subscriber at $91.99 because it increased prices on programming packages and the cost of leasing boxes.
DirecTV's results come a day after its main competitor, Dish Network added 104,000 subscribers, sailing past analysts' estimates.
Net income rose to $731 million, or $1.07 per share, from $674 million, or 85 cents per share, a year earlier.
DirecTV's revenue rose 12 percent to $7.05 billion.
(Reporting By Liana B. Baker; Editing by Maureen Bavdek and Leslie Gevirtz)