UPDATE 2-Pricing changes dent Rogers wireless revenue; profit up

Thu Oct 24, 2013 10:16am EDT

By Alastair Sharp

TORONTO Oct 24 (Reuters) - Rogers Communications Inc said on Thursday third-quarter revenue slipped at its wireless unit, the company's biggest business, due to pricing revisions, even as its profit squeaked past expectations.

Canada's largest wireless company, which has some 9.5 million mobile customers, said revenue was crimped by new, lower-priced roaming plans, while phone sales also dropped and fewer people signed up for service.

Rogers, also one of the country's biggest cable television and Internet providers, added 64,000 net postpaid wireless subscribers, significantly fewer than expected and down from 76,000 a year earlier.

This is a closely watched measure because postpaid customers sign multi-year contracts and typically pay much more each month than prepaid subscribers.

At that pace, Rogers could cede more of its leading market share to rivals Telus Corp and BCE Inc's Bell, which share a national wireless network. Both are due to report quarterly earnings next month.

"Rogers Wireless is still underperforming and we expect much better from Bell Mobility and Telus Mobility," Canaccord Genuity analyst Dvai Ghose wrote in a note to clients.

Rogers' chief executive, Nadir Mohamed, who is due to leave his post soon, said the slower wireless growth was likely linked to the timing of premium device launches and moves by Canada's telecom regulator to enforce maximum two-year contracts. This has forced operators to adjust pricing from their typical three-year contracts.

"My sense is that all of the changes in the industry associated with the transition from three to two-year contracts, along with the timing and impact of device launches during the quarter, combined to moderate the market growth somewhat in the period," Mohamed said during his final earnings conference call at Rogers, before incoming CEO Guy Laurence takes over at the helm early in December.

Excluding restructuring, acquisition and other one-time items, the company said third-quarter earnings rose to C$501 million, or 97 Canadian cents a share, from C$495 million, or 96 Canadian cents a share, a year earlier.

Analysts, on average, had forecast earnings of 96 Canadian cents a share, according to Thomson Reuters I/B/E/S.

Rogers said net income in the quarter fell marginally to C$464 million, from C$466 million.

Rogers, which also owns television stations, magazines and the Toronto Blue Jays baseball team, said operating revenue rose 1.5 percent to C$3.22 billion.

The company's wireless revenue declined 2.3 percent as phone sales dropped.

The average monthly bill of its wireless customers fell 1.8 percent to C$60.81. Postpaid churn, the measure of how many of those valuable customers leave each month, was at 1.23 percent.

The company said the decline was largely due to changes it made to pricing of its cross-border roaming service. In May, it introduced a C$7.99 flat daily rate for customers traveling to the United States.

Rogers lost 39,000 cable TV subscribers and added 18,000 Internet customers in the quarter.

Established cable operators have suffered from the emergence of cheaper online products, such as Netflix's streaming subscription service.

Rogers has also been hit by rival Bell's continued rollout of its Internet-based Fibe TV product in Ontario, which Rogers' Mohamed said is now available to 70 percent of Rogers' potential subscriber base.