Canada's Rogers holds fire on guidance after subscriber jump

(Reuters) - Rogers Communications Inc RCIb.TO topped analysts' estimates for quarterly profit on Thursday as it drew greater numbers of subscribers into high-priced postpaid mobile phone contracts, but it stopped short of upgrading annual profit guidance.

FILE PHOTO: A sign is pictured outside a Rogers Communications retail store in Ottawa, Ontario, Canada July 20, 2017. REUTERS/Chris Wattie

Canada’s largest wireless provider has been investing heavily in customer service and its various networks, leading to a net addition of 122,000 postpaid wireless subscribers, who pay for services monthly, during the quarter.

That was up from the 93,000 users it added at the same time last year and 95,000 in the previous quarter.

Several sector analysts, however, were taken aback that the company had not seen enough to raise its forecasts for this year and shares in the company fell 2.5 percent after opening in Toronto.

“We were surprised that management did not raise guidance despite the strong year-to-date,” Phillip Huang of Barclays Capital Inc wrote in a note.

Other analysts asked managers during an earnings call why the company was being conservative on its outlook given the results.

The Toronto-based company said on average wireless customers paid 4 percent more per month in the quarter ended June 30.

The postpaid churn rate - the pace at which subscribers leave - fell to its lowest in nine years at 1.01 percent.

Efforts to improve services for customers has “reflected in reduced churn, reduced calls into our call center, along with the solid uptick in digital adoption,” chief executive Joseph Natale said on a call with analysts.

An attempt by Peer Shaw Communications SJRb.TO to break into Canada's mobile market by undercutting existing players on price has put pressure on Rogers, Telus Corp T.TO and BCE Inc BCE.TO.

Rogers said it invested C$240-million in its wireless business in the second quarter, up 52 per cent from the same time last year. For cable, it upped investment 24 percent to C$352 million.

The company, which has been testing streaming device Ignite TV in Ontario in the face of competition from BCE’s upgraded fiber network, said the “soft-launch” had drawn positive reviews from customers in the second quarter.

Natale said that Ignite TV was “just the beginning” of a connected home solution, that could remotely control everything from home security to lighting and temperature control.

Rogers’ net income rose to C$538 million ($406.34 million), or C$1.04 per share, in the quarter, from C$528 million, or C$1.02 per share, a year earlier.

Revenue rose to C$3.76 billion from C$3.62 billion.

Excluding one-time items, the company earned C$1.07 per share, while analysts had on average expected C$1.05, according to Thomson Reuters I/B/E/S.

Reporting by Karan Nagarkatti in Bengaluru; editing by Patrick Graham