February 5, 2008 / 8:24 PM / 10 years ago

MTS mulls wireless push as operating profit rises

TORONTO (Reuters) - Manitoba Telecom Services Inc MBT.TO is in talks with potential partners regarding entry into Canada's wireless market, but still hasn't made a final decision, it said on Tuesday.

"The company will not make any decisions about whether or how to proceed until it has completed its analysis and discussions with potential partners regarding the range of strategies available for entry," MTS said as it announced fourth-quarter results.

It had previously described the opportunity for a fourth national wireless player to compete against BCE Inc (BCE.TO), Telus Corp (T.TO) and Rogers Communications Inc (RCIb.TO) as significant.

Ottawa said in November it would set aside a chunk of airwaves exclusively for new entrants to bid on in a wireless spectrum auction slated for late May.

MTS said its fourth-quarter profit from operations increased

due to a 15 percent rise in revenue from growth services such as high-speed Internet, digital TV and Web-based communications.

The company had earnings from continuing operations of 62 Canadian cents a share, for the three months ended December 31. That was up from 57 Canadian cents per share, a year earlier.

MTS also said it thinks it was "prudent" to stop share buybacks while it evaluates a potential push into the wireless market.

"This tells us it is stockpiling cash in the event that it wants to make a bigger capital commitment to a wireless product launch," National Bank Financial analyst Greg MacDonald wrote in a note to clients on Tuesday.

"We believe such a move could ultimately be positive for shareholders, but given the high free-cash profile of this stock, the market will likely disagree in the near term."

He also wrote he found the company's quarterly results "relatively in line."

Basic earnings per share, which include a non-cash future tax adjustment and other items that aren't part of the company's continuing operations, dropped to 22 Canadian cents from C$3.18 in the same period last year.

Net income was C$14.3 million, down from C$216.1 million.

Revenue hit C$489.2 million, up from C$479.1 million. Growth-services revenues rose to C$204.7 million from C$178 million, while legacy service revenue continued to erode, slipping to C$284.5 million from C$301.1 million.

The Winnipeg, Manitoba-based company said it also continued to see reduced network usage as Rogers and AT&T Corp (T.N) move traffic to their own networks. But it reiterated a 2008 outlook, first issued in December, forecasting earnings per share from continuing operations of between C$2.95 and C$3.15 and revenue in the range of C$1.92 billion to C$1.98 billion.

MTS shares were down C$1.44 at C$41.31 late Tuesday afternoon amid a broad selloff on the Toronto Stock Exchange.

($1=$1.01 Canadian)

Reporting by Wojtek Dabrowski; Editing by Rob Wilson;

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