Rogers expected to increase dividend but iPhone costs may impact Q4 results

MONTREAL - Rogers Communications is expected to hike its dividend by 10 per cent when it announces fourth-quarter results early Wednesday, but the big telecom may be impacted by costs associated with Apple's iPhone.

"We believe Rogers will announce a 10 per cent dividend increase and renew its buyback program, although the company may repurchase a smaller amount of shares this year due to higher cash commitments," UBS analyst Phillip Huang said in a research note.

Huang described Rogers' situation as "bracing for another iPhone launch quarter" due to the costs associated with upgrading existing iPhone customers with the newer iPhone 4S.

He said the growth of postpaid subscribers, usually smartphone customers on lucrative three-year contracts, was likely hindered by tighter supplies of the iPhone and upgrade costs during the quarter, which ended Dec. 31.

"Assuming management once again prioritized upgrade demands from existing subscribers over demand from new subscribers, we expected Q4 postpaid net adds will be below 'fair share,' similar to past iPhone launch quarters," Huang said in a note forecasting Rogers' fourth-quarter financial performance.

Huang has predicted that Rogers (TSX:RCI.B) will add 66,000 net postpaid subscribers in the quarter.

By comparison, Telus (TSX:T) added 148,000 postpaid subscribers and Bell (TSX:BCE) added 132,000 in the same quarter.

The Toronto-based Rogers has said its priority has been to upgrade existing customers' smartphones to keep them from going elsewhere in the competitive wireless industry.

RBC Capital Markets said Rogers' results for the quarter and 2012 guidance are expected to reflect "intense" competition both in wireless and television segments, but they should be largely neutral to a $37 to $38 share price.

"The catalyst we are looking for to get the stock going to more than $40 is something to break on the new entrant wireless front (auction rules, consolidation, bankruptcy), which we expect to happen at some point in 2012," RBC said in a note on Canadian companies.

New wireless players Wind Mobile and Public Mobile have threatened to sit out the next federal auction on radio waves unless there's a bidding process that doesn't put them against deep-pocketed Rogers, Bell and Telus.

Wind and Public Mobile say they would be outbid by the bigger players for radio waves they want to expand their networks into smaller cities and rural Canada.

Huang has said he believes consolidation in the Canadian wireless market is "inevitable."

Rogers, the largest of Canada's wireless carriers with 9.3 million subscribers, has been feeling the pinch of competition not only from Bell and Telus but from new wireless players Wind Mobile, Mobilicity, Public Mobile and Quebecor's Videotron (TSX:QBR.B).

Its major competitors have caught up with advanced wireless networks and Bell and Telus also offer the iPhone, an advantage that Rogers initially had.

Shares in Rogers were down 28 cents at $37.64 in afternoon trading Tuesday on the Toronto Stock Exchange.