August 11, 2008 / 6:54 PM / 9 years ago

MTS profit down despite gains in wireless, Internet

TORONTO (Reuters) - Canadian regional communications firm Manitoba Telecom Services MBT.TO reported a lower quarterly profit on Monday even as it cut costs and had strong growth in its wireless, high-speed Internet and digital television services.

MTS said it earned C$38 million ($35.5 million), or 58 Canadian cents a share, in the three months ended June 30. That was down from a profit of C$57 million, or 88 Canadian cents a share, in the same period a year earlier.

Earnings from continuing operations rose to 81 Canadian cents a share from 79 Canadian cents a share a year earlier.

MTS also reported annualized cost reductions of C$20.1 million at the end of the second quarter, already hitting its 2008 target of between C$20 million and C$30 million.

The company had hoped to be a big bidder in Canada’s wireless spectrum auction, but those plans were dashed when a consortium made up of MTS and a pair of private equity backers fell apart in late May -- just days before bidding was set to begin.

MTS, which already has a wireless presence in its home province of Manitoba, said at the time that intense negotiations among the group’s members stalled over a handful of key issues.

However, the company still bought enough spectrum to cover 1.2 million people in Manitoba for about C$41 million, it said on Monday.

The company said it was moving some of its wireless needs away from BCE Inc’s BCE.TO Bell Mobility to new suppliers and to its own platform. It said the costs of moving away from Bell as well as costs related to the spectrum auction were C$10.3 million in the quarter.

“We are disputing certain costs being charged by Bell Mobility associated with transitioning away from Bell Mobility and are of the opinion that such costs are recoverable from them,” MTS said.

“We have commenced formal proceedings in accordance with the dispute resolution mechanism in our agreement.”

MTS said revenue rose to C$486.4 million in the quarter from C$474.1 million a year earlier. Revenue from “growth services” such as wireless, Web-based unified messaging, digital TV and high-speed Internet shot up 15.4 percent to C$214.9 million, MTS said.

The company’s shares were down 76 Canadian cents at C$40.50 on the Toronto Stock Exchange late on Monday afternoon.

($1=$1.07 Canadian)

Reporting by Wojtek Dabrowski; Editing by Peter Galloway

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