Cable helps Rogers offset wireless pressure

Tue Jul 26, 2011 10:33am EDT
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By Alastair Sharp

TORONTO (Reuters) - Under assault from competitors, Rogers Communications reported an almost flat quarterly profit on Tuesday, sending its shares sharply lower, as it had to fight hard to keep its lead position in Canada's wireless sector.

Improved margins and sales in the Toronto-based company's cable unit were offset by tighter margins in its wireless business caused by rising expenses and a lower-than-expected average monthly bill for customers, Canaccord Genuity analyst Dvai Ghose said.

"At the moment there's nothing particularly positive on the wireless side apart from the fact that the (subscriber) numbers weren't as bad as they have been," he said.

Shares in the company fell 4.8 percent to C$36.00 on Tuesday morning on the Toronto Stock Exchange. Prior to the results, they were up almost 10 percent this year.

Rogers said it added 135,000 net wireless subscribers in the second quarter, consisting of 108,000 postpaid and 27,000 prepaid customers, and 16,000 cable-based customers for its television, Internet and landline telephone products.

Earnings for the wireless unit were hit by subsidy costs linked to activating almost 600,000 new smartphones, now in the hands of almost half of Rogers' postpaid customers.

In addition, rival BCE Inc's Bell Canada unit is offering new competition to Rogers Cable with its Internet protocol television offering.

"The company's wireless division continues to be a drag on results; with a resurgent Bell competing with IPTV, we remain wary that the level of margin improvement exhibited in cable cannot persist indefinitely," Desjardins analyst Maher Yaghi wrote in a note to clients.   Continued...

<p>A pedestrian uses his mobile phone while walking past a Rogers store in Ottawa July 21, 2008. REUTERS/Chris Wattie</p>