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Rogers Subscriber Adds Top Estimates on Smartphone Discounts

Rogers Communications Inc. (RCI/B), Canada’s largest wireless operator, reported second-quarter subscriber gains that beat analysts’ estimates by offering more discounts for smartphones.

The company signed up 98,000 customers to long-term contracts in the quarter, compared with the 74,000 average forecast of seven analysts surveyed by Bloomberg. Profit was 96 Canadian cents a share, excluding one-time items. Analysts had predicted 97 cents on average.

Chief Executive Officer Nadir Mohamed, who plans to retire in January, is trying to stay ahead of rivals BCE Inc. (BCE) and Telus Corp. (T), which have expanded their wireless businesses faster than Rogers in recent quarters. While equipment costs such as smartphone discounts rose 17 percent, the company reduced other wireless expenses by 5 percent, helping boost profits.

“Cost-cutting was really good, and I think that offset some of the negative metrics,” said Jeff Fan, an analyst at Scotia Capital Inc. in Toronto.

Net income rose C$532 million (C$518 million), or 93 cents a share, from C$413 million, or 77 cents, a year earlier. Sales climbed 3.4 percent to C$3.21 billion, compared with analysts’ average estimate of C$3.2 billion.

The subscriber gain compared with 32,000 in the period that ended in March, when BCE added 59,497 and Telus signed up 59,000. Rogers’s top competitors are both scheduled to report second-quarter results next month.

Growth Rate

Rogers ended the second quarter with 7.98 million contract subscribers, up 3.5 percent from a year earlier. That compared with annual growth of 3.4 percent in the prior three-month period.

Rogers, which owns cable channels SportsNet and CityTV as well as Major League Baseball’s Toronto Blue Jays, is seeking to entice customers to pay more to get exclusive video programming.

Average revenue per contract customer -- a key indicator of how much each subscriber is spending on calls, video and Web surfing from their mobile device -- dropped C$1.10 to C$67.36, compared with the average estimate of C$64.90.

Rogers rose 1.7 percent to C$41.95 at the close in Toronto. The stock has dropped 7.1 percent this year amid concern that Verizon Communications Inc. (VZ) may compete in Canada.

Verizon Threat

Verizon, whose market value of about $144 billion is more than double that of BCE, Rogers and Telus combined, said last month that it was considering entering the Canadian wireless market.

Rogers would support a Verizon entry into Canada as long as the government ensures a “level playing field” for all wireless companies, Mohamed said in a conference call today.

The Canadian government must require providers to roll out networks instead of “cherry-picking,” allow both Canadian and foreign carriers to buy the same amount of spectrum and give all providers equal opportunity to acquire smaller companies, Mohamed said.

(Rogers held a conference call to discuss its results. For details, click here.)

To contact the reporters on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net; Madeline McMahon in New York at mmcmahon26@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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