October 27, 2009 / 11:34 AM / 8 years ago

Rogers profit rises thanks to BlackBerry, iPhone

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<p>A Rogers Communications Inc. office tower is seen in downtown Montreal, March 6, 2009.Shaun Best</p>

TORONTO (Reuters) - Canada's Rogers Communications Inc (RCIb.TO) reported higher-than-expected quarterly results on Tuesday as subscribers snapped up smartphones like Research In Motion's RIM.TORIMM.O BlackBerry and Apple's (AAPL.O) iPhone despite the recession.

The results pushed up Rogers shares by more than 4 percent even though the company also reported that additions of postpaid, or longer-term, wireless users fell in the quarter compared with last year.

That decline reflected an unusually high number of additions a year earlier, when the iPhone was first launched in Canada, the company said.

The rapid growth in smartphone subscribers at Rogers over the past year could also come under pressure as rivals BCE Inc (BCE.TO) and Telus Corp (T.TO) prepare to sell the iPhone starting next month.

Rogers, owner of Canada's biggest wireless carrier, said third-quarter net income fell to C$485 million ($453.3 million), or 79 Canadian cents a share, from C$495 million, or 78 Canadian cents a share, a year earlier.

Excluding items, earnings per share rose to 82 Canadian cents from 73 Canadian cents. Analysts on average were expecting 54 Canadian cents, according to Thomson Reuters I/B/E/S.

Total revenue rose to C$3.04 billion from C$2.98 billion, exceeding analysts' estimates of C$3.03 billion.

"The market just got reminded that superior network assets and handset selection can be a powerful differentiator," National Bank Financial analyst Greg MacDonald wrote in a note to clients.

Rogers shares rose C$1.30, or 4.5 percent, to C$30.20 on the Toronto Stock Exchange shortly after the market opened on Tuesday. At midafternoon they were up C$1.20 at C$30.10.

The company has cut costs to cope with the economic slowdown. Chief Executive Nadir Mohamed told analysts that about 20 percent of jobs at the vice-president level and higher have been cut in the company's wireless and cable divisions.

Toronto-based Rogers activated more than 370,000 smartphones in the quarter -- mostly BlackBerries, iPhones and phones running on Google's (GOOG.O) Android operating system. About 45 percent of those activations were new subscribers.

Rogers added 167,000 new postpaid, or longer-term, wireless subscribers in the quarter. That was down from 191,000 a year earlier, when Rogers launched the iPhone.

Because the number of existing subscribers upgrading to the iPhone was lower this past quarter than a year earlier, Rogers' cost of equipment sales also dropped to C$272 million from C$378 million.

End of Iphone Monopoly

Next month will mark the end of the monopoly over the iPhone that Rogers held in Canada as the only carrier using the GSM wireless technology. BCE and Telus have announced that a joint upgrade of their networks will be complete in November, and they plan to start selling the iPhone that month.

"This was a good quarter (for Rogers)," said MacDougall, MacDougall & MacTier analyst Troy Crandall. However, he added: "It's going to be a lot harder competition now for new subscribers, at least on the smartphone side."

Rob Bruce, head of Rogers' wireless business, told reporters that while the iPhone's success shouldn't be underestimated, the broad range of other smartphones becoming available will likely diminish its importance to the company.

"I think the reality now is the iPhone has had a good run, it will continue to be a factor, but there's so many other devices," he said.

Rogers said its data revenue jumped 46 percent in the quarter. Subscribers with smartphones now represent about 28 percent of the overall postpaid subscriber base, up from 15 percent a year earlier.

However, the recession's impact could still be seen in the average monthly revenue per postpaid wireless user, which fell to C$76.79 from C$78.60. Rogers said subscribers remained cautious about spending too much in the weak economy.

Revenue in the company's cable operations, which includes Internet and home phone revenue, rose to C$773 million from C$724 million a year earlier.

($1=$1.07 Canadian)

Reporting by Wojtek Dabrowski; editing by Peter Galloway

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