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TORONTO (Reuters) - Rogers Communications, Canada's biggest wireless telecoms company, said on Wednesday that cost-cutting and growth in its cable and media businesses pushed it to a stronger than expected quarterly profit despite lagging core wireless results.
Rogers also said it would increase its quarterly dividend by 11 percent and launch a C$1 billion ($1 billion) share buyback program, which helped push up its shares almost 1 percent to C$38.13 on the Toronto Stock Exchange.
The buyback program allows the company to repurchase about 10 percent of its outstanding Class B shares.
The quarterly results themselves were lackluster, analysts said. Profit from Rogers wireless business fell, reflecting high upfront costs tied to subsidizing activations and lower average monthly bills for its more valuable postpaid subscribers.
"It wasn't a strong quarter," said analyst Maher Yaghi at Desjardins Securities. "But they managed their costs enough not to have that impact on revenue translate too much to earnings."
BMO Capital Markets analyst Tim Casey downgraded the stock to "market perform" from "outperform" after the results, citing the wireless performance.
Rogers activated a record number of iPhones and other smartphones but many existing customers defected to rivals. All told, the company added far fewer mobile customers than its two main competitors: BCE Inc's Bell Canada unit and Telus Corp.
Rogers said it added 42,000 net postpaid subscribers in the quarter. By comparison, Bell Canada added 132,000 net postpaid subscribers and Telus grabbed 148,000. Postpaid subscribers sign multi-year contracts and typically pay four times more a month than pre-paid users.
"We did see a tick up in postpaid churn particularly at the lower end of the market," Rogers Chief Executive Nadir Mohamed told analysts on a conference call. "We've got some work to do here and we can do better on this metric."
Rogers was initially the only Canadian wireless company to offer Apple's iPhone, giving it an early advantage. Bell and Telus have since built a shared national network that has helped them win market share and charge more.
At the same time, the three main providers are being pressured by new, smaller competitors and by regional cable operators such as Quebecor's Videotron, which have begun offering wireless service since a 2008 government auction of airwaves.
An average Rogers wireless customer spent C$58.82 a month in the quarter, a sharp drop from a year earlier, in what executives described as an "intensely competitive environment".
The tough conditions are likely to continue and the company forecast 2012 earnings in a range of between no growth and a 4 percent increase.
Although the cost of adding new wireless subscribers rose, the cost of keeping existing subscribers dipped slightly from a year earlier.
Meanwhile, margins in Rogers' cable unit improved to 48.1 percent from 45.9 percent as it raised prices and cut down on the number of customers leaving, allowing for 8 percent profit growth on 3 percent more sales.
Rogers expects to further reduce its cable network operating costs as it moves its remaining analog customers to digital.
The company's media segment was aided by price rises for its Sportsnet channel, but a slowdown in overall advertising industry limited revenue growth. Revenue, however, had grown 10 percent year-on-year in the previous quarter.
Rogers' overall operating profit rose 2.8 percent to C$1.09 billion, in the fourth quarter.
Adjusted net profit rose to C$372 million, or 70 Canadian cents a share, from C$338 million, or 60 Canadian cents, in the year-before quarter.
Analysts, on average, had forecast earnings of 67 Canadian cents a share, according to Thomson Reuters I/B/E/S.
Revenue rose to C$3.18 billion from C$3.14 billion.
Excluding stock-based compensation, costs related to pension obligations and other one-time items, the company expects 2012 operating profit of C$4.73 billion to C$4.92 billion. On that basis, it earned C$4.72 billion in 2011.
Rogers' new quarterly dividend payout will be 39.5 Canadian cents a share, up from 35.5 Canadian cents a share.
Reporting by Euan Rocha and Alastair Sharp; Editing by Peter Galloway