July 12, 2012 / 1:08 PM / 5 years ago

Cogeco Cable profit rises, but sees tough times ahead

3 Min Read

(Reuters) - Cogeco Cable Inc (CCA.TO), the main unit of media and telecom company Cogeco Inc (CGO.TO), posted profit and revenue growth in the third quarter but warned that business would slow as tough competition makes it more difficult to sign up customers.

The Montreal-based company, which offers cable TV, high-speed Internet and telephone services in mostly rural areas of Ontario and Quebec, said profit from continuing operations edged higher as revenue rose 7.2 percent.

Larger rivals BCE Inc (BCE.TO) and Quebecor Inc (QBRa.TO) also operate in the same markets and are expanding into Cogeco's rural heartland.

The company, which had sold its struggling Portuguese unit earlier this year, earned C$53.2 million, or C$1.09 per share, from continuing operations, up from C$52.4 million, or C$1.08 per share, in the year-ago period. Revenue came in at C$319.8 million.

"Similar to Shaw results, Cogeco Cable is balancing growth and profitability in saturation of increasing competition and service saturation," RBC Capital Markets analyst Drew McReynolds wrote in a note to investors, referring to Shaw Communications (SJRb.TO), the dominant cable company in Western Canada.

Analysts had expected Cogeco Cable to earn C$1.07 per share on revenue of C$323.6 million.

The company cut its customer growth forecasts for the full year to 72,000 from 80,000 as it lost some television customers and recorded slower growth in Internet and telephone services.

It expects to add only 50,000 new customers in fiscal 2013.

It said full-year revenue would slip slightly from its earlier projections but operating income should come in slightly higher than expected thanks to cost-cutting measures.

For fiscal 2013, which starts in September, Cogeco Cable expects 5.5 percent revenue growth but operating costs are expected to grow slightly faster. Profit is expected to grow 12 percent.

The company's shares, which have fallen 10 percent since the start of the year, closed on Wednesday at C$45.83 on the Toronto Stock Exchange.

Reporting by Alastair Sharp in Toronto and Sayantani Ghosh in Bangalore; Editing by Sreejiraj Eluvangal

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