July 27, 2010 / 11:44 AM / 7 years ago

UPDATE 3-Rogers sticks to full-year outlook, stock drops

* Company says no "firm basis" for raising outlook

* Declines to reveal pricing for new Chatr brand

* Stock falls as much as 3.4 pct

(Recasts with CEO, more analyst comment; stock price move)

By Nicole Mordant

VANCOUVER, British Columbia , July 27 (Reuters) - Rogers Communications Inc (RCIb.TO) posted a stronger-than-expected 21 percent rise in quarterly earnings on Tuesday but it stood pat on its full-year outlook, suggesting a softer second half.

Shares of Rogers, which owns Canada's biggest wireless carrier, fell after it said there wasn't a "firm basis" for raising its forecast because of expected stiffer competition and the cost of upgrading smartphone customers to new devices.

"It's impossible not to be cautious when so many new competitors are coming into the market," said National Bank Financial analyst Greg MacDonald.

"No one knows exactly what pricing plans will be out there," he said.

Canada's wireless market, until recently the preserve of Rogers, and its two big rivals, BCE Inc (BCE.TO) and Telus Corp (T.TO), is expected to have at least four new entrants this year.

Although the small upstarts, including Globalive's Wind Mobile, Public Mobile and Data & Audio Visual Enterprises Wireless Inc's Mobilicity, are not expected to make deep inroads, they are likely to steal away some budget-conscious customers at the market's low end.

In response to the fresh challenge, Rogers late last month said it would launch a discount wireless brand called Chatr Wireless Inc, a low-cost, unlimited talk-and-text-only brand.

Rogers Chief Executive Nadir Mohamed on Tuesday declined to provide pricing details for Chatr, which the market was hoping for, but said he did not expect the limited-coverage brand to cannibalize customers from Rogers' other higher-end plans.

"We fully expect the vast majority of post-paid subscribers, who are interested in large coverage areas, data offerings or high-end handsets, will remain attracted to the Rogers and Fido plans," Mohamed said on a conference call.

By late morning, Rogers shares were down 68 Canadian cents, or 1.8 percent, at C$36.72 on the Toronto Stock Exchange.

SMARTPHONES DRIVE EARNINGS

Earlier Rogers, which also owns cable-TV and publishing businesses, said it earned C$451 million ($438 million), or 78 Canadian cents a share, in the second quarter ended June 30, driven by strong data revenues from smartphones like Apple Inc's (AAPL.O) iPhone and Research in Motion Ltd's RIM.TO BlackBerry devices.

That was ahead of analyst expectations of 69 Canadian cents and 21 percent higher than earnings of $374 million, or 59 Canadian cents, in the same period last year.

Revenue rose 5 percent to C$3.03 billion.

Some analysts had expected the Toronto-based company to raise its 2010 financial and operating guidance. In February, Rogers forecast that its 2010 adjusted profit would climb 2 percent to 7 percent on a consolidated basis [ID:nN1699567].

That range "suggests the company expects a meaningful slowdown in growth in the second half of 2010," BMO Capital Markets analyst Tim Casey said in a note to clients.

But others were more sanguine on Rogers' outlook.

"We believe management is being conservative on guidance and we continue to believe Rogers will hit the upper end of its current guidance range for 2010," Desjardins Securities analyst Maher Yaghi said.

In its most lucrative wireless segment, Rogers added 98,000 net postpaid subscribers, or 34 percent fewer than in the same quarter last year.

The slower growth, which was largely in line with analyst expectations, in part reflects the launch of a new high-speed network by BCE and Telus late in 2009.

$1=$1.03 Canadian Additional reporting by Euan Rocha in Toronto

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