February 16, 2011 / 12:12 PM / 7 years ago

UPDATE 4-Competitive pressures hit Rogers profit, forecasts

* Adjusted EPS C$0.64 vs C$0.65 Street view

* Revenue C$3.15 bln, up 3 percent

* Avg monthly wireless bill falls to C$61.72 from C$64.80

* Modest 2011 guidance reflects competitive concerns

* Shares gain on “relief rally” after early dip (Adds analyst quote, updates shares to close)

By Alastair Sharp

TORONTO, Feb 16 (Reuters) - Rogers Communications (RCIb.TO), Canada’s biggest wireless telecoms provider, offered a modest 2011 growth forecast on Wednesday as competitive pressures mount and its profit rose a lower-than-expected 5 percent in the fourth quarter.

Rogers added far fewer lucrative contract wireless subscribers in the Christmas quarter than its major rivals, which reported earnings last week. Its average revenue per user also slipped.

But its shares rallied after a morning dip and were almost 3 percent higher by mid-afternoon as investors digested the results against their most dismal fears. The stock closed up 1.9 percent at C$35.39.

“The numbers were disappointing ... but it wasn’t as bad as it could have been,” said Jonathan Allen of RBC Capital Markets.

“When you combine that with the low investor expectations, and the fact the stock is pretty cheap relative to its peers, it’s a good mix for a relief rally,” he said.

Churn — the number of customers leaving the company — increased and Rogers said it spent heavily to retain its highest-value customers.

“Recognizing the competitive environment, we put a sharp focus on retention to help ensure that we minimize churn in the most valuable segments of our base,” Chief Executive Nadir Mohamed told analysts on a conference call.

“The churn/retention metrics point to a margin challenge for 2011,” Merrill Lynch analyst Glen Campbell wrote in a note.

The Toronto-based cable and telecommunications company, said it expects adjusted operating profit to be flat to slightly higher in 2011, at between C$4.6 billion ($4.65 billion) and C$4.77 billion. It sees free cash flow to be flat or down by as much as 6 percent at C$1.85 billion.

The company said it added 123,000 net wireless subscribers — 60 percent of them prepaid — and 17,000 cable-based customers for its television, Internet and landline telephone products.

Prepaid customers typically spend much less than those on contracts, although Rogers also counts iPad users in the prepaid category.

Rogers’ average wireless customer paid C$61.72 a month, down from C$64.80 in the previous quarter and C$63.23 a year earlier, while data revenue grew 32 percent.

The company’s biggest wireless rivals, BCE Inc’s (BCE.TO) Bell companies and Telus (T.TO), both reported strong quarterly subscriber growth last week, particularly at the high end. [ID:nN10262604] [ID:nSGE71A09K]

Rogers added 49,000 net postpaid wireless subscribers, who typically pay more than four times more for service than customers who buy credit up front.

By comparison, Bell added 156,708 net postpaid wireless subscribers and Telus added 109,000.

Telus and Bell share an upgraded national wireless network that has helped them win market share from Rogers by matching its ability to offer subscribers high-end smartphones such as Apple’s (AAPL.O) iPhone.

All three companies, however, have been challenged by low-cost offerings from new entrants such as Globalive’s Wind Mobile, Mobilicity and Public Mobile. Rogers launched a second budget wireless brand called chatr in July to try to fend off the newcomers.

In Quebec, a further pressure is coming from Quebecor’s (QBRa.TO) Videotron cable arm, which launched a wireless service in September to add to its ability to bundle television, telephone and Internet. [ID:nN09185742]

Rogers posted quarterly net income of C$327 million, or 58 Canadian cents a share, up from C$310 million, or 51 Canadian cents, a year earlier.

Excluding one-time items, earnings rose to 64 Canadian cents a share from 61 Canadian cents. On that basis, analysts had, on average, expected 65 Canadian cents a share, according to Thomson Reuters I/B/E/S.

Revenue rose 3 percent to C$3.15 billion, compared with analysts’ estimates of C$3.17 billion.

Rogers increased its 2011 dividend by 11 percent, a move widely expected by investors.

It said it would pay an annual dividend of C$1.42 per share, up from C$1.28, in quarterly amounts of 35.5 Canadian cents starting in April.

$1=$0.99 Canadian Additional reporting by Bhaswati Mukhopadhyay in Bangalore; editing by Rob Wilson

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