Rogers Communications 2Q Net Up; Sees Higher 2nd Half Wireless Costs

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Rogers Communications posted higher second quarter earnings in the absence of a large year earlier charge as revenue improved 12%. However disappointing wireless and cable subscriber results prompted a decline in the company's stock price particularly since there had been some market speculation ahead of the earnings announcement that the company would report strong result based on its recent track record.

In Toronto Tuesday, Rogers is down C$2.2613, or 6%, to C$35.29 on 1.38 million shares.

The Toronto-based communications and media giant earned C$301 million or 47 Canadian cents a share in its latest second quarter on revenue of C$2.80 billion.

A year earlier, Rogers lost C$56 million or 9 Canadian cents after taking a C$452 million charge related to the introduction of a cash-settlement feature for stock options. Revenue in the year-earlier quarter totaled C$2.5 billion.

On an adjusted, or non-GAAP, basis, Rogers earned C$364 million or 57 Canadian cents, compared with C$299 million or 47 Canadian cents a year earlier.

The Thomson Reuters mean estimate was for earnings of 52 Canadian cents a share on revenue of C$2.84 billion.

Wireless postpaid net additions were 92,000 in the latest quarter, compared with 133,000 a year earlier. Postpaid subscriber monthly churn fell to 1.06% from 1.15% and postpaid monthly average revenue per user, or ARPU, rose 4% driven in part by a 34% growth in data revenue. However, in recent past quarters, Rogers had generated postpaid wireless ARPU growth of 7-8%.

Rogers reported overall wireless net additions, which also includes prepaid net additions, of 100,000, falling short of analysts' expectations of 117,000 and down from 138,400 in the year-ago period. The shortfall likely reflects aggressive pricing from rival Telus Corp. of its newly launched Koodo Mobile flanker brand, analysts suggested.

The Canadian government's auction of advanced wireless spectrum closed last week, bringing in C$4.25 billion from 15 companies. Rogers topped the list with bids totaling just under C$1 billion. Rogers said it's required to submit payment in full by Sept. 3.

In the wake of this auction, Rogers and the country's other wireless-phone incumbents, Telus and BCE, stand to face increasing competition from new entrants.

On Rogers' earnings conference call, Chief Executive Ted Rogers acknowleged the prospect of intensifying competition but he remained unfazed. Since the company's founding, all of Rogers' businesses have seen the number the competitors ebb and flow and during that time, the company has "not only survived but thrived," Mr. Rogers said.

The company's cable and telecom division had 745,000 residential voice-over-cable telephony subscribers lines at the end of the quarter, with 41,000 net additions during the quarter, down from 68,800 in the year-ago period. Further, the company's Internet subscriber results fell short of expectations in the quarter. Rogers added 13,000, down from 21,000 a year ago.

In the seasonally slow quarter, cable's Internet subscribers increased by 13,000 to 1.5 million and digital-cable households increased by 23,000 to 1.4 million.

Rogers is both Canada's largest wireless operator and cable-television provider.

When Rogers released first-quarter results in late April, it announced a deal with Apple to bring the 3G iPhone to Canada. Rogers launched the iPhone in Canada on July 11, but faced public outcry over its original expensive price plans. Two days before the phone went on sale, Rogers announced a temporary reduction in data fees.

In its second-quarter release, Rogers said it hasn't made any specific revisions to its 2008 financial and operating guidance ranges, but said the launch of the iPhone 3G is expected to cause Wireless' cost of acquisition per subscriber to increase in the second half of 2008 and be greater than first contemplated in its original 2008 guidance. It said the iPhone 3G handsets are priced at C$199 and C$299 for the 8MB and 16MB models, respectively, "which reflects significant handset subsidies that Wireless incurs for each unit sold."

As reported, in January Rogers forecast revenue of C$11.2 billion to C$11.5 billion and net subscriber additions of 550,000 to 625,000 for both its retail-wireless business and its residential-cable revenue-generating-units segment.

-Judy McKinnon; 416-306-2100; AskNewswires@dowjones.com

(Ben Dummett in Toronto contributed to this story.)

Corrected July 29, 2008 10:36 ET (14:36 GMT)

(END) Dow Jones Newswires

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