* EPS C$0.98 vs C$0.94 year-ago
* Revenue up 6 percent, beats expectations
* Telus raises revenue outlook for the year
* UBS upgrades stock, says attractive in volatile market
* Shares little changed (Adds CFO comments; updates shares)
TORONTO, Aug 5 Telus Corp's (T.TO) quarterly net profit rose 7 percent on gains at its wireless and Internet television segments, outshining its larger rivals and prompting the company to raise its revenue forecast for the year.
The Canadian telecoms company, whose shares dropped on Friday along with the broader market, said the rapid adoption of smartphones such as Apple Inc's (AAPL.O) iPhone boosted data revenue and fueled subscriber growth.
Telus added 94,000 wireless customers in the quarter, a decline from the number signed up a year earlier but ahead of the average estimate of analysts. Wireless revenue rose 10 percent and wireless data revenue increased 49 percent.
But the cost of activations rose 8 percent to C$370 each as the industry subsidized the cost of providing smartphones for new subscribers. For BCE Inc's (BCE.TO) Bell Canada, new activations cost even more at C$400 each, a 19 percent increase.
On average, each of the Vancouver-based company's wireless customers spent C$58.88 a month in the quarter, up 2.5 percent but lower than analysts had estimated, Macquarie Capital Markets analyst Greg MacDonald said.
Even so, on that basis, Canada's third-largest wireless provider had a stronger quarterly performance than its main competitors, Rogers Communications Inc (RCIb.TO) and Bell, he added.
Canada's telecoms market has largely been a three-horse race until recently, as Mobilicity, Globalive's Wind Mobile and other entrants stepped up the pressure on them by launching discount services.
"The impact from wireless competition is lower at Telus. That's the biggest takeaway from the report," MacDonald said.
Its greater exposure to the less-competitive Western Canadian market may give it an advantage over the other two, which are more focused on the Eastern half of the country.
"Our results show a distinct outperformance in favor of Telus," Chief Financial Officer Robert McFarlane told Reuters in an interview. He said Telus topped Rogers and Bell in terms of revenue, profit growth and customer loyalty.
While Research In Motion Inc's RIM.TO BlackBerries formed the largest chunk of its smartphone sales, Google Inc's (GOOG.O) Android-software based devices were the fastest selling, McFarlane said. Its Android line-up includes Samsung Electronics Co's (005930.KS) Galaxy S and HTC Corp's (2498.TW) Desire handsets.
REVENUE TOPS ESTIMATES
Second-quarter earnings rose to C$324 million ($331 million), or 98 Canadian cents a share, from C$302 million, or 94 Canadian cents, a year earlier. Analysts had on average had expected earnings of 96 Canadian cents a share, according to Thomson Reuters I/B/E/S.
Revenue grew 6 percent to C$2.55 billion, more than the average estimate of C$2.52 billion.
Telus it increased its television subscriber base by 46,000, or 59 percent, as it expanded its recently launched Internet-based TV service, Optik.
Telus is locked in a battle for Internet and television consumers of Western Canadians with Calgary-based cable Shaw Communications (SJRb.TO), which has delayed launching a wireless service.
The company raised its 2011 revenue outlook by C$200 to C$300 million. It also sees more capital expenses.
UBS analyst Phillip Huang raised his rating on the stock to "buy" from "hold," following the results.
The shares are "an attractive investment for a volatile macro economic environment" because of its "stable business, strong balance sheet and focus on returning capital," he wrote in a research report.
The stock, up 13 percent since the start of the year, was up 2 Canadian cents at C$51.30 on a weak Toronto Stock Exchange. ($1=0.98 Canadian) (Reporting by S. John Tilak; editing by Janet Guttsman)