* Adjusted EPS C$0.60 versus Street view C$0.61
* Revenue of C$4.7 bln beats expected C$4.6 bln
* Wireless, IPTV help, but competition at low end heats up
* Dividend growth likely to slow - analyst (Recasts with CEO comments, analyst quote, background)
By Alastair Sharp
TORONTO, Feb 10 (Reuters) - A growing base of high-paying smartphone users helped lift BCE Inc's (BCE.TO) profit by 25 percent, and Canada's largest telecommunications company said it was poised to cash in on Internet television this year.
The Montreal-based company said it expects adjusted earnings per share to grow between 4 and 8 percent in 2011 as consumers switch to the internet to view television programs.
Free cash flow will rise to C$2.2 billion-C$2.3 billion, from C$1.4 billion in 2010, when BCE paid down a pension deficit.
Shares in the company, which is popular with investors focusing on its steady dividend payouts, were down 35 Canadian cents at C$36.24 by mid morning.
"Most people own this stock for dividend and dividend growth potential ... (but) how much dividend growth can we really generate from this company going forward given the fact that earnings and free cash flow growth are very modest," Canaccord Genuity analyst Dvai Ghose said.
He said dividend growth would likely slow to around 4 to 6 percent, below the average payout increase of recent years.
BCE Chief Executive George Cope told an analyst call that the company is focused on the more lucrative postpaid market in the mobile phone sector and he brushed off subscriber losses and lower average bills in the "marginally profitable" prepaid market.
Globalive's low-cost and contract-free Wind Mobile has grabbed more than 250,000 Canadian subscribers since its late 2009 launch. Two other wireless-only entrants, Mobilicity and Public Mobile, also offer unlimited talk and text packages.
BCE, which operates under the Bell Canada brand, said booming demand for wireless data pushed revenue up to C$52.34 ($52.34) per user in the fourth quarter.
Postpaid users paid an average of C$63.47 a month, and BCE said it met its own target of grabbing one third of new postpaid customers in 2010.
The "very impressive" wireless subscriber growth led Morgan Stanley analyst Glen Campbell to suggest wireless market leader Rogers Communications (RCIb.TO) will record a soft quarter when it reports next Wednesday.
Bell's HSPA+ network, which it shares with rival Telus (T.TO), has let both companies offer high-end smartphones such as Apple's (AAPL.O) iPhone, which were once the exclusive domain of Rogers. Telus, Canada's other leading telecommunications company, reports results on Friday.
BCE said it added 156,708 net postpaid wireless subscribers but lost 39,926 prepaid wireless customers, reflecting more competition at the lower end of the market.
BCE's net income rose to C$439 million, or 58 Canadian cents a share in the quarter, up from a year-earlier profit of C$350 million, or 46 Canadian cents a share.
Excluding one-time items, the company said earnings rose to 60 Canadian cents a share, from 51 Canadian cents a share a year earlier. Its revenue was C$4.7 billion.
On that basis, analysts had on average expected BCE to earn 61 Canadian cents a share on C$4.6 billion of revenue, according to Thomson Reuters I/B/E/S.
BCE is awaiting regulator approval for its C$1.3 billion bid to buy CTV, Canada's biggest private broadcaster, as it bets Canadians will increasingly watch content over the Internet and on mobile devices. [ID:nN0122719]
It is also expanding an Internet television product, Bell Fibe, which it says will reach 2 million homes in Toronto and Montreal this year and help it compete with bundled television, telephone and Internet offerings of cable competitors such as Rogers and Quebecor's (QBRa.TO) Videotron. Videotron launched a wireless network in Quebec in September. [ID:nN09185742]
Bell also added 23,019 net television subscribers and 12,099 high-speed Internet customers. Its landline telephone business lost 64,172 customers, much less than expected.
BCE said it is aiming for revenue growth of between 1 and 2 percent in 2011 and for adjusted earnings per share of between C$2.90 and C$3.00, up from C$2.79 for fiscal 2010. Analysts had expected adjusted earnings of C$2.93 a share. ($1 = $1 Canadian dollar) (Additional reporting by Euan Rocha; editing by Janet Guttsman)