July 23, 2015 / 11:46 AM / 2 years ago

UPDATE 2-Rogers Communications halts wireless exits; net profit drops

(Recasts with details on wireless. Adds share reaction, analyst comment, CEO quote)

By Alastair Sharp

TORONTO, July 23 (Reuters) - Rogers Communications Inc added wireless customers in the second quarter after two straight quarters of net defections, a key milestone in the broad strategic overhaul the Canadian telecoms and media company has embarked on.

Reporting quarterly financial results on Thursday, the company said it added 24,000 net postpaid wireless subscribers, who typically spend much more than those who prepay for service. It also gained 8,000 prepay customers.

Under Chief Executive Officer Guy Laurence, who joined in late 2013 with a reputation for shaking up corporate culture, Rogers has shied away from offering customer discounts despite sharp competition for subscribers.

“Subscriber metrics showed improvement and the steady financials indicate that management’s strategic decision to run off low-profit historical retention plans appears to be the right one,” Desjardins analyst Maher Yaghi wrote in a note.

Rogers shares were 1.6 percent higher at C$44.52.

Net income dropped 10 percent, although adjusted operating profit came in a touch above analysts’ expectations.

Rogers’ media division posted a sharp jump in profit and revenue on the back of advertising connected to its first season of broadcasting National Hockey League games. The unit contributed 17 percent of total operating revenue, which rose 6 percent from a year earlier to C$3.4 billion ($2.6 billion).

In its fixed-line business, Rogers shed 32,000 cable-TV subscribers and 11,000 landline telephone lines, but gained 4,000 Internet customers.

“Overall demand for content is going up, overall demand for Internet is going up,” Laurence told reporters on a conference call. “(People) want to watch ‘Breaking Bad’ or ‘Game of Thrones’...that’s what they want to spend their time doing, or just discovering things on the Internet.”

In a sign of the challenges facing television distributors, HBO, the company behind the two shows Laurence mentioned, has recently moved to sell its content directly to U.S. viewers.

Rogers’ net income was C$363 million, or 70 Canadian cents a share, in the April-June quarter, down from C$405 million, or 79 cents a share, a year earlier.

On an adjusted basis, it earned 80 Canadian cents a share, down from 84 cents. Analysts, on average, had expected an adjusted 79 Canadian cents a share, according to Thomson Reuters I/B/E/S.

Rogers upped its outlook for 2015 free cash flow by C$175 million due to tax-loss carry-forwards it gained in a complicated deal to acquire struggling wireless operator Mobilicity.

It maintained other 2015 financial forecasts.

$1=$1.30 Canadian Editing by Franklin Paul; and Peter Galloway

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