TORONTO (Reuters) - Quebecor Inc (QBRa.TO)(QBRb.TO) on Wednesday said it would buy back about 10 percent of its stock and reported solid growth at its fledgling wireless network, sending its share price higher.
The media and cable company said growth in wireless subscribers more than compensated second-quarter losses in cable, and that network-building costs were mostly behind the service, which launched in September last year.
Its quarterly earnings dropped even as total revenue rose 6 percent, but the profit exceeded market expectations.
Shares in the Montreal-based company, which have lost more than a quarter of their value so far this year, had jumped more than 6 percent by early afternoon after Quebecor announced the stock repurchase plan.
Quebecor owns French and English-language television channels as well as newspapers. Its cable arm, Videotron, provides cable TV, Internet and mobile phone services.
On an adjusted basis, Quebecor earned 93 Canadian cents a basic share from continuing operations, down from 98 Canadian cents a year earlier.
Analysts, on average, had expected adjusted earnings of 84 Canadian cents a share, according to Thomson Reuters I/B/E/S.
The beat was mainly driven by Quebecor’s telecom division,” said Maher Yaghi from Desjardins Securities.
“It appears that the magnitude of the negative impact from wireless is beginning to be less significant as the company continues to scale its offering.”
Revenue rose to C$1.05 billion, higher than the average estimate of C$1.04 billion.
Videotron added 45,900 customers to its wireless network in the quarter, bringing its total to 203,800.
Robert Depatie, who heads Videotron, said the average wireless customer spent around C$47 a month and 42 percent used smartphones. Quebecor does not offer Apple’s iPhone.
The company paid C$482 per wireless subscriber addition in the quarter and said roll-out of its mobile network had raised its operating expenses.
“Introducing a new product entails significant capital expenditures and the revenues generated during the first months following a launch are not always sufficient to cover the higher expenses,” Chief Executive Pierre-Karl Peladeau said in a statement.
Quebecor’s wireless network means it can match bundled deals from rivals such as BCE Inc’s (BCE.TO) Bell Canada unit and Rogers Communications (RCIb.TO), offering TV, Internet, landline and mobile phone services.
The company lost 7,900 cable subscribers despite gaining 26,700 digital TV users, and signed up 2,900 Internet and 11,800 phone customers in the quarter.
Analysts had forecast Quebecor would add between 30,000 and 35,000 wireless subscribers and lose around 6,000 basic cable customers.
Quebecor owns the right-leaning Sun chain of tabloid newspapers, including the Toronto Sun, and launched Sun News TV in April. In French-speaking Quebec, it owns Le Journal de Montreal daily newspaper, TVA television and the LCN all-news channel.
Net income in the period ended June 30 was C$55.2 million ($55.6 million), or 85 Canadian cents a diluted share, compared with C$60.8 million, or 93 Canadian cents, a year ago.
Second-quarter net profit reflected a C$29.9 million amortization charge and a C$7.9 million charge from restructuring some operations.
Quebecor plans to buy back up to 985,233 of its closely held class A multiple voting shares and 4.5 million of its more actively traded class B shares through a normal course issuer bid in the next 12 months.
The company’s Class B shares gained 6.2 percent to C$30.01 on the Toronto Stock Exchange by mid-afternoon.
Additional reporting by Abhiram Nandakumar in Bangalore; editing by Frank McGurty