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Rogers looks to wireless data services for growth; earns 64 cents a share in Q1

MONTREAL - Consumers who email, text and surf the Internet on their smartphones are expected to keep driving growth for Rogers Communications Inc.(TSX:RCI.B), Canada's largest cellphone services provider.

MONTREAL - Consumers who email, text and surf the Internet on their smartphones are expected to keep driving growth for Rogers Communications Inc.(TSX:RCI.B), Canada's largest cellphone services provider.

"The opportunity is there and the consumption of wireless data will be a big driver of our business," president and CEO Nadir Mohamed said Wednesday, after Rogers reported its first-quarter financial results.

The use of these data services now make up 26 per cent of total wireless network revenues and the possibilities are "far, far greater," he said in a media conference call.

"That's where the future is - growing wireless data."

Toronto-based Rogers also said one-third of its wireless customers now use smartphones, primarily BlackBerrys, iPhones and Google Android devices, that are designed to do much more than make voice calls.

In its quarterly results, Rogers reported it earned $380 million or 64 cents a share in the three months ended March 31. That's up from $309 million or 49 cents a year ago.

Due to competition, Rogers added just 47,000 wireless post-paid customers, usually on three-year contracts with higher-end mobile phones in the quarter. That's a drop of 57 per cent from the same period last year.

But Mohamed said this decrease reflects lower advertising spending by Rogers during the quarter, which included the Vancouver Olympics in February.

During this period, Rogers expected competitor and Olympic sponsor Bell(TSX:BCE) to be doing significant advertising. Mohamed said it wouldn't have been effective marketing to compete on that level during the Olympics.

Mohamed said that more than 60 per cent of the company's revenues come from the wireless division."There's a lot more growth for sure on the wireless side."

Rob Bruce, president of Rogers' wireless division, said eventually that half of its customers will use smartphones, but wasn't specific about how long that would take. He called them "high value" customers.

"Once they get a smartphone in their hand, there's no going back to a basic phone," Bruce told a conference call.

Mohamed was even more enthusiastic about smartphone adoption. "Over time, it's my view that every one of our customers will have a smartphone."

Rogers said it will use its radio spectrum, acquired in a federal auction almost two years ago, for data services and won't be upgrading to a fourth-generation wireless network in the near-term.

As for new wireless players such as Globalive's Wind Mobile, they aren't impacting Rogers at this time.

"Most of us would have thought that the new entrants would have been in market in a much bigger way with a much bigger subscriber count," Bruce said.

Desjardins Securities analyst Maher Yaghi said in a research note that Rogers has a "solid" position in wireless and wireless services will continue to be the "engine of growth."

But Yaghi noted the addition of new subscribers was weak in the quarter.

"Seasonally, Q1 is a light quarter for additions, though increased competition from Bell, Telus and new entrants may be beginning to have an effect on Rogers' subscriber additions, as we expect," he wrote.

Bruce also said controlling costs helped bring in good results, noting jobs were cut last year, vendor contracts were renegotiated and departmental spending tightened.

Costs in the Rogers cable and wireless divisions only grew by three per cent against revenues of seven per cent in the wireless division and six per cent in its cable division in the quarter, he told analysts in an earlier call.

Mohamed said for the first time in two years, revenues began to grow again in its media division with most of it coming from specialty TV stations as well as the Shopping Channel businesses.Rogers' overall revenue rose five per cent to nearly $2.9 billion from $2.7 billion, with a strong contribution from wireless data sales, the company said.

Wireless data revenue was up about 40 per cent to $415 million in the quarter, compared to the same period last year. Shares in Rogers dropped 50 cents to $35.10 in afternoon trading Wednesday on the Toronto Stock Exchange.

 
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