Bloomberg News

Rogers Quarterly Profit Trails Estimates on IPhones

April 24, 2012

Rogers Communications Inc. (RCI/B), Canada’s largest wireless carrier, reported first-quarter profit that trailed analysts’ estimates as the company spent more on subsidizing smartphones, including Apple Inc (AAPL:US)’s iPhone.

Profit excluding certain items was 67 Canadian cents (68 cents) a share, compared with the 75-cent average estimate from a Bloomberg survey of 16 analysts. Rogers’s sales slipped 1.1 percent to C$2.95 billion from a year earlier, the Toronto-based company said today in a statement. Analysts expected C$3.05 billion.

Rogers, competing with BCE Inc. (BCE) and Telus Corp. (T) for a bigger share of Canada’s smartphone and tablet market, activated 35 percent more iPhones last quarter than a year earlier. Retention costs, including phone subsidies, offered in exchange for multi-year contract commitments grew as wireless-data revenue growth slowed.

“We are seeing a softer rate of top line growth than we’d like and that reflects the intensely competitive environment and slowing growth of wireless data,” Chief Executive Officer Nadir Mohamed told analysts on a conference call today.

Retention costs, including subsidies, jumped 12 percent to $208 million from a year earlier, the company said.

During the quarter, Rogers added 47,000 subscribers with contracts, the long-term customers who typically buy a smartphone and spend more on data. That compares with an estimate of 41,850 from Jeff Fan, an analyst at Scotia Capital Inc. in Toronto. He rates Rogers the equivalent of hold.

Prepaid Losses

Rogers is the first of the big three Canadian carriers, which together control more than 90 percent of the nation’s wireless market, to report first-quarter earnings. Fan expects BCE added 65,000 contract subscribers last quarter and Telus, 50,000.

Rogers’s no-frills Chatr wireless service, which is trying to fend off new entrants Wind Mobile, Public Mobile, saw prepaid customer losses accelerate to 72,000 last quarter from 10,000 a year earlier. The carrier’s average monthly revenue from both contract and prepaid customers, who usually opt for cheaper calling plans, was C$57.65, down from C$59.91 a year earlier and less than Fan’s C$57.70 estimate.

The company today named Anthony Staffieri, formerly senior vice president, finance at BCE, as chief financial officer, succeeding Bill Linton.

New CFO

Net income dropped to C$305 million, or 57 cents a share, from C$335 million, or 60 cents, a year earlier. Total wireless revenue slipped less than 1 percent to C$1.71 billion despite a 16 percent increase in data spending.

“The market expected poor results, but these results were much worse than expected, especially on the cable side,” Canaccord Genuity analyst Dvai Ghose said in a note to investors. Ghose, based in Toronto, advises holding the shares.

Sales at Rogers cable business fell 3.1 percent to C$923 million as it lost 7,000 customers to competitors, primarily BCE.

Rogers fell 1.3 percent to C$38.50 at the close in Toronto. The stock had climbed 13 percent in the past 12 months before today.

To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net


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