October 28, 2008 / 11:24 AM / in 9 years

Rogers profit jumps on iPhone sales

TORONTO (Reuters) - Rogers Communications Inc (RCIb.TO) posted an 84 percent spike in quarterly profit on robust sales of Apple’s (AAPL.O) iPhone, but it lowered the full-year outlook for its wireless unit to reflect higher costs of activating new customers.

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

The Canadian telecommunications and cable television provider, whose shares rose more than 5 percent after the announcement, also sought to reassure investors and analysts about the strength of the company as it enters the economic slowdown.

Rogers, which owns Canada’s biggest wireless service provider, combines its cellphone offerings with high-speed Internet and television -- services that its CEO said customers are unlikely to part with, even in tough times.

“Compared to many companies today, we are extremely well financed to weather a storm -- even a big one. Our balance sheet is rock solid,” Ted Rogers said in a conference call with analysts.

Third-quarter profit rose to $495 million, or 78 cents per share, from $269 million, or 42 cents, in the same period a year earlier.

Total revenue climbed to $2.98 billion, up from $2.61 billion.

National Bank Financial analyst Greg MacDonald said the results were in line with his estimates. Given the company’s ability to generate cash, he said, Rogers could soon announce a dividend increase.

“With double-digit operating cash flow growth, roughly $2 billion in expected free cash flow for 2009 and no debt due until 2011, we continue to believe this stock is very well-positioned to outperform in the current market,” MacDonald wrote in a note to clients.

“Though there was no dividend increase, the strong free cash flow suggests one is imminent.”

Rogers said it added 191,000 post-paid wireless subscribers in the quarter. Post-paid users are those who pay monthly bills and often sign up for multiyear contracts. They are considered more lucrative than prepaid subscribers, who pay for a predetermined amount of service.

The company also said it activated about 255,000 iPhones during the quarter, with about one-third of the activations being new subscribers.

“The number of activations ... is simply phenomenal,” Nadir Mohamed, the company’s chief operating officer, told analysts.

Rogers launched the iPhone in Canada on July 11. However, the initial sales drove significantly higher acquisition and retention costs at it wireless unit, the company said.

As a result, the company now sees its 2008 wireless adjusted operating profit between $2.80 billion and $2.85 billion, down from its original outlook of between $2.88 billion and $2.98 billion.

The company also said its cable division’s Internet subscriber base grew during the quarter by 29,000 to 1.6 million, and digital cable households increased by 58,000 to reach 1.5 million.

Rogers shares jumped 5.3 percent, rising $1.55 to $30.62 on the Toronto Stock Exchange.

Editing by Frank McGurty

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