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Rogers adjusted profit up, better wireless margins

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Rogers Communications Inc. (RCI.B-T), the country’s largest mobile phone company, reported higher adjusted earnings on Tuesday as profit margins rose in its cellular phone business even as competition picked up.

Wireless operating profit margin as a percentage of network revenue rose to 48.2 percent, from 46.5 percent in the same quarter last year. The company said margins were helped by better cost control.

"We could see the revenue trajectory was lower than what we had anticipated, and we took immediate action. We accelerated a number of cost management objectives," said chief executive Nadir Mohamed on a conference call.

But Mohamed said the company was also working on boosting its top line in future quarters: "To be clear, our definition of winning longer term is from top-line growth."

The company maintained its guidance for fiscal 2012.

In June, Rogers said it had cut 375 jobs to trim costs amid tough competition. The company employs around 30,000 people.

RBC Capital Markets analyst Drew McReynolds said the results beat his expectations largely on the strength of wireless margins. He was also encouraged to see Rogers maintaining its outlook.

"We believed this quarter there was a risk that management would revise downward," he wrote in a note to clients.

Operating profit also rose for the company's cable business as Rogers raised prices and signed up more subscribers for its cable internet services.

TOUGH COMPETITION

In wireless, Rogers added 87,000 net postpaid subscribers in the quarter. Postpaid subscribers sign multi-year contracts to use the latest devices and usually pay more each month than pre-paid users. Wireless operating revenue edged up $6 million to $1.76 billion.

Rogers has faced pressure from new, smaller competitors and regional cable operators such as Quebecor's (QBR.A-T) Videotron, which begun offering wireless service after a 2008 government auction of airwaves.

The stepped-up competition is holding down costs for wireless customers, with the average customer spending $59.10 a month from $60.26 in the same quarter last year. The company said customers were paying less for voice services, largely because of heightened competition.

The company's net income for the quarter ended June 30 was $400 million, or 75 cents a share, compared with $410 million, or 74 cents, a year earlier.

On an adjusted basis, earnings from continuing operations rose to $478 million, or 91 cents a share, from $469 million, or 85 cents.

Analysts, on average, had expected earnings of 86 cents a share, according to Thomson Reuters I/B/E/S.

Revenue edged up to $3.11 billion from $3.10 billion, shy of the average analyst estimate of $3.14 billion.

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