July 24, 2013 / 11:39 AM / 4 years ago

UPDATE 2-Profit up, but Canada's Rogers pays price for wireless growth

* Profit, revenue roughly in line with analyst expectations

* Wireless subscriber growth strong, but average bill slips

* Cable customers exit, cost of content rises

By Alastair Sharp

TORONTO, July 24 (Reuters) - Rogers Communications , Canada's largest wireless phone company and a major cable-TV operator, reported a steep rise in wireless data revenue for the second quarter, but the cost of attracting new business pulled down its per customer return.

Rogers also owns television stations, magazines and the Toronto Blue Jays Major League Baseball team. It said on Wednesday it lost cable-TV subscribers in the quarter and paid more for Blue Jays salaries and for National Hockey League (NHL) programming for its cable channels.

Adjusted net profit rose 4 percent, roughly in line with analysts' expectations, and its shares were up 1 percent in early trade on Wednesday.

Rogers added 98,000 net postpaid wireless subscribers, beating analysts' expectations for around 76,000. This is a closely watched measure because postpaid customers often sign multiyear contracts and typically pay much more each month than prepaid subscribers.

But the average monthly bill of its customers fell nearly 2 percent to C$67.36, hurt by promotions and lower roaming charges. Postpaid churn, the proportion of those valuable customers leaving each month, held steady at 1.17 percent.

"Postpaid wireless subscriber growth was encouraging, but (average revenue per user) was disappointing," Canaccord Genuity analyst Dvai Ghose wrote in a note to clients.

Rogers has faced increasingly tough wireless competition from big rivals BCE Inc and Telus Corp, which both added more postpaid customers than Rogers in the first quarter.

BCE and Telus are expected to report quarterly results on Aug. 8.

VERIZON LOOMING

Hanging over the heads of Canada's three big wireless operators, which together control some 90 percent of the market, is the possibility that U.S. giant Verizon Communications will move into Canada.

Rogers executives brushed off the threat on Wednesday, citing several factors including Canada's difficult geography and mature urban markets.

"I have never seen how a four-player market can work in a country like Canada. I never thought of it as a sustainable model," outgoing Rogers Chief Executive Nadir Mohamed said on a call with investors and analysts.

He said Verizon shouldn't get preferential treatment in an upcoming government auction of prime wireless airwaves, treatment that it could receive as a "new entrant" in the market. Reuters has reported that Verizon is interested in buying one or more of the small players in the Canadian market.

Rogers did not provide an update on its search for a new CEO after Mohamed's planned departure early next year.

Rogers said its adjusted net income rose to C$497 million ($483 million), or 96 Canadian cents a share, in the second quarter from C$478 million, or 91 Canadian cents a share, a year earlier.

Operating revenue rose 3.4 percent to C$3.21 billion.

Analysts on average had expected Rogers to earn 97 Canadian cents per share on revenue of C$3.21 billion, according to Thomson Reuters I/B/E/S.

Rogers lost about 35,000 cable-TV subscribers in the quarter, as rival BCE ramped up its deployment of an Internet-based alternative. Canaccord's Ghose said it was the worst customer loss ever reported by a Canadian cable company. Television revenue slipped 4 percent.

The company's media division, which includes newly acquired sports channel theScore, reported a 19 percent fall in profit as costs, including Blue Jays salaries and NHL games, rose.

Shares in Rogers were up 1.1 percent at C$41.70 on the Toronto Stock Exchange soon after the open. They have fallen some 20 percent since April.

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