(Reuters) - Rogers Communications Inc (RCIb.TO), Canada’s largest mobile phone company, reported higher adjusted earnings on Tuesday as margins rose in its cellular phone business even as competition picked up, and its shares rose more than 5 percent.
Wireless operating profit margin as a percentage of network revenue rose to 48.2 percent from 46.5 percent in the same quarter last year. The company said better cost control and lower customer turnover helped margins.
“We could see the revenue trajectory was lower than what we had anticipated, and we took immediate action. We accelerated a number of cost management objectives,” Chief Executive Nadir Mohamed said on a conference call with analysts.
On a call with reporters, Mohamed said Rogers is working to improve its supply chain, reduce discretionary costs and boost customer service, probing which problems spark customer service calls: “If you can address the underlying drivers we have a better customer experience and frankly the costs also improve.”
The monthly postpaid churn rate, the proportion of customers cancelling their service, fell to 1.15 percent from 1.21 percent in the same quarter last year, and this helped margins. Mohamed noted that smartphone customers, who make up an increasing share of Rogers’ business, tend to have lower churn.
Rogers, which also owns television stations, magazines and the Toronto Blue Jays baseball team, maintained its guidance for fiscal 2012 - it expects adjusted operating profit between C$4.73 billion and C$4.92 billion, up from C$4.72 billion in 2011.
RBC Capital Markets analyst Drew McReynolds said the results beat his expectations, largely on the strong wireless margins, and he was encouraged to see Rogers maintaining its outlook.
“We believed this quarter there was a risk that management would revise downward,” he wrote in a note to clients.
The stock rose 5.3 percent to C$39.22 on the Toronto Stock Exchange by mid-morning on Tuesday.
Rogers added 87,000 net postpaid wireless subscribers in the quarter, subscribers who sign multi-year contracts to use the latest devices and usually pay more each month than pre-paid users. Wireless operating revenue edged up C$6 million to C$1.76 billion.
Rogers has faced pressure from new, smaller competitors and regional cable operators such as Quebecor’s QBRa.TO Videotron, which began offering wireless service after a 2008 government auction of airwaves.
The stepped-up competition is holding down costs, with the average customer spending C$59.10 a month, down from C$60.26 in the same quarter last year. Rogers said customers were paying less for voice services as competition rose.
In June, Rogers, which employs about 30,000 people, said it had cut 375 jobs to trim costs. It also cut 300 jobs in March.
Operating profit also rose for the company’s cable business as Rogers raised prices and signed up more internet subscribers. Overall cable subscribers fell by 4,000 units in the quarter.
The cable business is also facing more competition as telecom companies ramp up Internet-based television products.
Rogers’ net income for the quarter to June 30 was C$400 million, or 75 Canadian cents a share, compared with C$410 million, or 74 Canadian cents, a year earlier.
Adjusted to exclude items such as integration, restructuring and acquisition costs, earnings from continuing operations rose to C$478 million, or 91 Canadian cents a share, from C$469 million, or 85 Canadian cents.
Analysts, on average, had expected earnings of 86 Canadian cents a share, according to Thomson Reuters I/B/E/S.
Revenue edged up to C$3.11 billion from C$3.10 billion, shy of the average analyst estimate of C$3.14 billion.
Reporting by Allison Martell; Editing by Frank McGurty and Janet Guttsman