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Telus, Bell third-quarter results to provide litmus tests for industry

Telus store at 25 York st. in downtown Toronto. July 15, 2013.

GLORIA NIETO/The Globe and Mail

Some of Canada's biggest telecoms will report their third-quarter results this week, providing investors with the latest scorecard on wireless competition.

BCE Inc. and Telus Corp. will be the focal points. Although incumbent carriers no longer face a competitive threat from U.S. giant Verizon Communications Inc., the industry is bracing for more regulatory action and coping with a maturing market.

There are already signs that some consumers are taking pause after the introduction of higher-priced two-year contracts. (Three-year contracts are effectively banned under a new industry code of conduct.) Others postponed smartphone upgrades as they waited for Apple Inc. to release the new iPhone. Both issues weighed on the third-quarter results of Rogers Communications Inc., Canada's largest carrier.

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"I think the Rogers result was driven at least partly by industry maturity, which suggests both Telus and BCE could see similar trends," said Greg MacDonald, an analyst with Macquarie Capital Markets Canada Ltd. Rogers posted softer-than-expected network revenues and subscriber growth, adding 64,000 net postpaid subscribers, 12,000 fewer than the year before.

BCE will report earnings on Thursday and analysts are expecting a strong wireless performance from its Bell Canada division, including robust growth in subscribers, average revenue per user (ARPU) and better retention of customers.

"An increased presence out West where ARPU is the highest in Canada, a focus on gaining share of business customers, and an increasing mix of smartphone subscribers are anticipated to drive strong data ARPU growth," wrote Adam Shine, a telecom analyst with National Bank Financial, in a research note.

BCE is expected to deliver adjusted earnings per share (EPS) of 77.4 cents and revenues of $5.15-billion, according to consensus estimates provided by Bloomberg. (BCE owns a 15 per cent stake in The Globe and Mail.)

Telus is in a different position. While Bell has strong wireless growth but declines in its wireline business, and Rogers has decent cable growth but is struggling in wireless, "Telus is firing on both cylinders," said Dvai Ghose, an analyst with Canaccord Genuity, in a research report. "We believe that this puts Telus in an enviable position."

Telus reports Friday, and consensus estimates call for adjusted EPS of 54 cents and revenues of $2.9-billion.

Investors will also be watching Manitoba Telecom Services Inc. The company, which will issue results on Thursday, was hit by Ottawa's rejected the sale of its Allstream division to Accelero Capital Holdings due to unspecified national security concerns. That sent the stock careening downward from the $32 level, and it closed Friday at $29.30.

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