Telus profit misses forecasts on spending to fuel wireless growth

TORONTO (Reuters) - Telus Corp T.TO, one of Canada's biggest telecom companies, reported a smaller-than-expected profit on Friday, as it spent heavily to win and retain wireless customers by investing in customer service and subsidizing high-end smartphones.

Telus Corp Chief Executive Officer Darren Entwistle speaks at their annual shareholders meeting in Toronto, May 5, 2011. REUTERS/Mark Blinch

Its shares fell 69 Canadian cents, or 1.5 percent, to C$44.86, making it one of the biggest contributors to the S&P/TSX composite index's .GSPTSE decline.

The company reported adjusted earnings of 68 Canadian cents per share in the second quarter ended June 30, missing the average forecast of 72 Canadian cents of analysts polled by Thomson Reuters I/B/E/S.

Vancouver-based Telus is engaged in a heated battle with rivals BCE Inc BCE.TO, Rogers Communications Inc RCIb.TO and Shaw Communications SJRb.TO for wireless customers that has prompted carriers to spend heavily on marketing and customer promotions.

Operating expenses before depreciation and amortization rose by C$120 million ($94 million) to C$2.08 billion, the company said.

Telus said new postpaid wireless customers rose to 99,000 during the quarter, compared with 61,000 a year earlier. The average monthly wireless bill rose 3.9 percent to C$66.87 as customers streamed more videos online and utilized data-intensive services.

While the wireless performance “crushed all metrics,” the additional spending weighed on profit as the company discounted phones and offered other incentives amid heightened competition, Barclays analyst Phillip Huang said in a note to clients.

BCE and Rogers also reported strong growth in wireless subscribers and average bills in the quarter.

Telus is facing renewed competition in western Canada from rival Shaw Communications, a strong player in the region that recently launched new internet and video products.

Telus added 17,000 internet connections and 5,000 television subscribers during the second quarter, slightly lower than what analysts were expecting, as Shaw gained market share, according to Huang.

Net income attributable to Telus shareholders fell to C$379 million, or 64 Canadian cents per share, from C$416 million, or 70 Canadian cents per share, a year earlier.

Operating revenue rose to C$3.27 billion from C$3.15 billion, the company said.

Additional reporting by Ahmed Farhatha in Bangalore; Editing by Jim Finkle and Chizu Nomiyama