UPDATE 3-Canada's Quebecor says nearing decision on mobile expansion

Thu Jul 31, 2014 1:54pm EDT

(Adds details from conference call, share-price move)

By Alastair Sharp

TORONTO, July 31 (Reuters) - Canadian telecom and media conglomerate Quebecor Inc says it is closing in on a decision on whether to buy up smaller competitors or team up with a partner to expand its wireless operations outside its home province of Quebec.

On the company's quarterly earnings call on Thursday, executives said they are talking to several potential partners about plans to become Canada's fourth national wireless player, a move that would fulfill a key goal of the federal government's telecom policy.

"Critical to our vision is an urgent need for fair and competitive, federally regulated roaming policy," Chief Executive Pierre Dion told analysts on the call, stressing that Ottawa must guarantee an affordable way for it to use its rivals' networks.

Montreal-based Quebecor bought wireless airwaves across much of Canada earlier this year but its services - cable TV, Internet, landline and mobile telephony - are now mostly offered in Quebec.

Analysts say an expansion could lock up capital for years, while the regulator's timetable for setting new wholesale wireless rules may stretch past the next auction of wireless airwaves.

Quebecor would only be able to fully participate in that auction if it already held operating assets in each region.

The head of Quebecor's wireless and cable arm said the company is now evaluating whether to purchase an existing network or build out a national network, and that the decision is expected in weeks or months.

Two struggling young wireless operators, Wind Mobile and Mobilicity, are up for sale after each bought spectrum licenses reserved for newcomers in a 2008 auction. Since then, Ottawa has repeatedly blocked the two from falling into the hands of Canada's three biggest phone companies: Telus Corp, BCE Inc's Bell, and Rogers Communications.

WEAK WIRELESS METRICS

Quebecor posted a much smaller second-quarter net loss on flat revenue on Thursday as cost-cutting in its media unit offset weakness in its wireless and cable arm.

Quebecor Media Inc, in which the company holds a 75 percent stake, took a C$190 million ($174 million) charge related to a transition to digital technology and to difficult market conditions in the newspaper industry.

Its Videotron business added 29,700 net wireless subscribers, but lost 3,600 net Internet connections and 17,100 cable-TV subscriptions in the quarter.

"Videotron subscriber results were weaker than expected, and wireless in Quebec remains a challenge," Canaccord Genuity analyst Dvai Ghose wrote.

Quebecor said income from continuing operations was C$66.0 million, or 54 Canadian cents a share. Revenue was up 0.6 percent at C$1.07 billion.

Analysts had expected Quebecor to earn 47 cents a share on revenue of C$1.08 billion, according to Thomson Reuters I/B/E/S.

The company's net loss narrowed to C$74.8 million from C$104.4 million.

Shares in Quebecor were down 1.2 percent at C$26.12 at midday on the Toronto Stock Exchange.

($1=$1.09 Canadian) (Reporting by Alastair Sharp; Editing by Nick Zieminski, Lisa Von Ahn and Peter Galloway)