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At Rogers, ‘wireless improvement continues’

The front entrance to Rogers Communications in Toronto: As Canada’s largest wireless carrier, Rogers has more than nine million subscribers.

Tim Fraser/The Globe and Mail

Rogers Communications Inc. is mounting a turnaround of its wireless division after a string of disappointing quarterly results from earlier this year suggested it was losing the battle for smartphone users.

As Canada's largest wireless carrier with more than nine million subscribers, Rogers is considered a bellwether for the industry. Earlier this year, it experienced a number of problems in its wireless division, including a sequential slowdown of its wireless data revenue growth rate – a trend that it now appears to have reversed.

During the third-quarter, it recorded wireless data revenue growth of 18 per cent as it earned more money on wireless data roaming, while also coaxing consumers to switch to more costly data. Rogers also maintained 48-per-cent margins for wireless during the July-to-September period. Investors, though, will be looking for more evidence that its wireless improvements can be sustained.

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Analysts have noted Rogers' third-quarter results only reflected the impact of less than two weeks of iPhone 5 sales. The real test of its wireless margin strength will only come during the fourth-quarter, which includes the holiday shopping season.

"We continue to very focused on our strategy around smartphones and attaching data to those smartphones," said Rob Bruce, head of Rogers' communications division. "People continue to … take more and more and larger data packages." Smartphone users now represent 65 per cent of Rogers' post-paid subscribers.

"Wireless improvement continues," Drew McReynolds, an analyst with RBC Dominion Securities Inc., wrote in a note to clients. Specifically, he noted that wireless margins remained "solid," in addition to improved post-paid churn.

Still, Rogers recorded increased costs for wireless equipment for the quarter as more and more customers opted for smartphones, including the new iPhone 5. Retention spending, which includes costly subsidies on device upgrades, also crept higher.

"We expect that Q4 will be characterized by a much higher iPhone mix," said Mr. Bruce.

Earlier Wednesday, Rogers reported a third-quarter net profit of $466-million or 90 cents per diluted share, compared with a year-ago profit of $491-million, or 87 cents. On an adjusted basis, net income amounted to $495-million, or 96 cents per share, surpassing analysts' expectations. Quarterly revenue increased by 1 per cent to $3.17-billion.

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