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Rogers Communications Inc. (RCI.B-T), the country's largest mobile phone company, said on Tuesday its quarterly profit dropped by a steeper-than-expected 16 percent as rising competition hurt its cable and wireless divisions.
Rogers added more premium smartphone customers than analysts had expected in the quarter. But even though sales of Apple Inc.'s iPhone and other handsets rose, the cost of subsidizing those devices held back revenue, while customer bills kept falling. Meanwhile its base of cable customers shrank.
"The market expected poor results, but these results were much worse than expected, especially on the cable side," said analyst Dvai Ghose from Canaccord Genuity.
An average Rogers wireless customer spent $57.65 a month in the quarter, down from $59.91 a year earlier. That decline, which had been expected, reflected efforts by Rogers to retain its position atop the industry by holding down customer charges.
The Toronto-based company's adjusted net profit fell to $356 million, or 67 cents a share, in the three months ended March 31. That compares with $423 million, or 76 cents, a year earlier.
Revenue slipped 1 percent to $2.95 billion.
Analysts, on average, had expected Rogers to earn 76 cents a share on revenue of $3.05 billion, according to Thomson Reuters I/B/E/S.
Rogers added 47,000 net postpaid subscribers in quarter, topping analysts' average estimate of 36,000 additions. Postpaid subscribers sign multi-year contracts to use the latest devices and typically pay four times more a month than pre-paid users.
But profit margins fell as Rogers sold more of the latest iPhone model with supplies catching up with shortages that developed after last year's launch. Rogers and other carriers spend heavily upfront to subsidize sales of the iPhone and other high-end devices.
On top of that, Rogers surprised analysts by losing 21,000 cable TV subscribers, including a net loss of 1,000 digital customers. A Reuters poll of eight analysts had expected 11,000 more digital TV customers.
Its cable business is thought to be under less pressure than its wireless business. BCE Inc's Bell Canada has been slow to roll out Internet-based television in Toronto, where both companies vie for consumer attention across a range of platforms.
In wireless, Rogers has faced pressure from new, smaller competitors and regional cable operators such as Quebecor's Videotron, which have begun offering wireless service since a 2008 government auction of airwaves.
Its main national wireless competitors, Bell and Telus Corp, teamed up several years ago to build a comparable network.