TORONTO — Rogers Communications Inc. saw its third-quarter profit go up 29 per cent helped by the strength of its wireless operations during the competitive period where the cable and telecom company fought to keep its smartphone customers.
“Our focus is on high-value customers,” Rob Bruce, president of the company’s wireless division, said Wednesday after Rogers reported a profit of $491 million.
“There’s no question whenever there’s new competition in the market, there is always some impact on churn,” he said of customers who leave and go to competitors.
Rogers (TSX:RCI.B), Telus (TSX:T) and BCE Inc.’s Bell Canada (TSX:BCE) are competing with each other and with new wireless carriers Wind Mobile, Mobilicity, Public Mobile and Quebecor’s Videotron (TSX:QBR.B) for mobile customers.
Toronto-based Rogers added 74,000 lucrative net new subscribers in its post-paid operations, dropping significantly from 108,000 added post-paid subscribers in the second quarter — even though the third quarter is considered a busy back-to-school period when students set up new phone plans.
Analysts had been expecting Rogers to add about 100,000 net new subscribers, who are usually on three-year contracts with BlackBerrys, iPhones or Android smartphones.
“Overall, it was a competitive quarter,” said Bruce when asked why Rogers didn’t meet the expectation.
Just more than one per cent of those customers left Rogers in the quarter and the amount Rogers’ smartphone customers are still spending is “stable and strong,” Bruce said on a call with media.
Chief executive Nadir Mohamed said 52 per cent of Rogers’ customers now have smartphones.
“We’ve crossed the 50 per cent threshold. That’s really an important milestone,” Mohamed said.
Net income at $491 million amounted to 87 cents per share, up from the $380 million reported a year earlier, equal to 66 cents per share, Rogers said.
On an adjusted basis, earnings were 89 cents per share, compared to average analyst expectations of 82 cents, according to a poll by Thomson Reuters. Revenue increased to $3.15 billion from $3.11 billion.
“The results clearly reflect the strength of our asset mix as well as the continuation of what I believe is an extremely competitive market,” Mohamed told analysts earlier on a conference call.
RBC Capital Markets analyst Andrew Calder said Rogers’ sounded confident but challenges remain.
“Competition pressures are the key impact, particularly from heavy new entrant advertising and awareness and new entrant offers,” Calder wrote in a research note.
Calder had estimated 99,000 net new subscribers in the lucrative post-paid category, which includes BlackBerry, iPhone and Android smartphone customers on three-year contracts.
“Rogers is trying to ease the negative trend by being less aggressive with re-pricing, controlling credits and adjustments and smart bundling, which are challenging in the face of improving scale and aggressive offers from new entrants and pressure from Bell and Telus in the smartphone market,” he wrote in a research note.
UBS analyst Phillip Huang had estimated 100,000 net new subscriber additions.
“We believe pricing competition in Q3 has been the most aggressive in six months,” Huang wrote in a recent note. “Overall, we believe Telus and Bell were more aggressive than RCI in subscriber acquisitions during back-to-school.”
Rogers also announced that chief financial officer Bill Linton will retire in the second quarter of 2012 and be replaced by Anthony Staffieri, former senior vice-president of finance at BCE Inc. (TSX:BCE).
The Toronto-based company is Canada’s largest cable TV operator, a major magazine publisher, TV and radio broadcaster and owner of the Toronto Blue Jays.
Shares in Rogers were up seven cents to $35.59 in afternoon trading Wednesday on the Toronto Stock Exchange.