Shaw CEO also warns regulators not to change things now
CALGARY – After showing strong wireless subscriber additions of more than 266,000 customers in fiscal 2019 and bringing in $1 billion in annual wireless revenue for the first time, Shaw Communications executives didn’t hold back their opinions during the year-end conference call with financial analysts.
CEO Brad Shaw, said the company spent the fiscal year (ended August 31) focused on adding broadband and wireless customers, expanding its wireless network in the west by rolling out its 700 MHz spectrum – all the while managing a large number of employees who took advantage of its voluntary departure program (which the company reported saved it $135 million in 2019).
Shaw also quoted a recent Ookla speed test result which showed Shaw is the fastest ISP in the cities in its wired western Canada footprint. While it’s worth noting most every carrier comes out on top in various metrics coming from a number of speed tests, be they JD Power, PC Magazine, Opensignal or others. That said, Canadian networks are pretty robust.
That Ookla report, Shaw pointed out, shows Canada ranks 11th in the world for download speeds, which speaks to our position as a technology leader with both intelligent networks and employees working in a competitive marketplace – and that the government and regulator need not mess that up.
“Facilities-based competition from Shaw and Freedom is working and will continue to work for Canada,” he said. “As an industry, we are all expanding and improving our networks… We can offer services and introduce new ones because we have invested significantly in the breadth and quality of our networks on which these services so heavily rely upon.
“The recent regulatory environment creates unnecessary uncertainty that has the potential to do more harm over the long term,” Shaw continued. “If companies can no longer have the opportunity to earn an appropriate return, they will change their investment profile and innovative technologies such as 5G, Internet of Things and… artificial intelligence will diminish along with the service levels that Canadians have been accustomed to.”
“Since the announcements of the wireless MVNO hearings and the reduced TPIA rates, we have already altered our plans with respect to launching new higher-speed Internet tiers and additional wireless expansion beyond our current footprint.” – Brad Shaw
“Since the announcements of the wireless MVNO hearings and the reduced TPIA rates, we have already altered our plans with respect to launching new higher-speed Internet tiers and additional wireless expansion beyond our current footprint.” The TPIA decision is under appeal, however, from the big cable companies, including Shaw.
“Throughout the regulatory process, we are hopeful the government recognizes the critical role that facilities-based companies play and the ability to usher in new technologies and deliver better and faster services for all Canadians.”
Later in the call, Shaw chief financial officer Trevor English noted the company has curtailed its wireless capital expenditure plans for 2020 already because of regulatory uncertainty, saying “some corridors between some of the cities” have been taken off the table for a 2020 build.
When we asked the company for some specifics on where those corridors are, a spokesperson declined to expand on those remarks.
WHEN IT COMES TO the wireless market, it was a rough and tumble summer for the wireless carriers, said Shaw Wireless president Paul McAleese. Rogers had a difficult quarter, but its executives stood by the decision to start offering both unlimited data plans starting at $75 and new equipment installment plans which lets customers pay for devices over two years (Ed note: they tried three, but that’s on hold).
The new plans launched to try and make it simpler for the customer to understand and eliminate overage fees. Rogers and Telus also launched device financing, which shifts the costs of the devices onto the customers, taking expensive handset subsidies off carriers’ balance sheets for customers who choose those options.
While Rogers led the way, Telus jumped in with similar moves. Bell followed, but in a more limited nature, and did not immediately offer device financing plans the way Rogers and Telus did.
TD Securities analyst Vince Valentini asked McAleese how he “is thinking about competitive intensity right now and certainly seeing from the Rogers’ results, they're hurting a little bit… Do you think yourselves and the industry could be doing a little bit better if somebody got more disciplined and others followed?”
The Freedom chief was unsparing in his criticism. “It's fair to describe Q4 as one of the most competitively intense periods the Canadian wireless industry has ever seen,” responded McAleese. “You've got all of the incumbents launching unlimited… So, we certainly saw some significant pressure over the course of a 90-day period.
“I would argue, and I think you saw earlier this week, there is something of a lack of pricing discipline in the market really across the board. My perspective is unlimited came out (from the big three) below the rate they probably should have – and certainly the results you saw this week probably support that.”
Included in the 266,000 new wireless customers for Freedom in the year ended August 31st for Shaw was an impressive 90,700 net new customers added in Q4 alone, so the company more than held its own, despite the fact it did not follow Rogers with equipment installment plans. Plus, Freedom’s Big Gig plan is priced $20 lower than the Big Three’s new plans and its Absolute Zero offer, where Freedom customers can get a new iPhone for $0 with nothing to pay off at the end of two years, is an attractive offer. Rogers and Telus EIP plans call for the balance of the phone to be paid off after two years.
So, Freedom is still in the subsidy game (as they all still are, to be fair) and McAleese called the big three installment plans a disguised price increase. “I think, other operators that describe their EIP’s like they magically removed hundreds of dollars of subsidy investment without any customer impact – that's a remarkable oversimplification from our perspective,” he said.
“They collapsed much of their rate plan umbrellas, but their ambition to coincidentally introduce EIPs to pay for those rate reductions has clearly not come to fruition. You saw echoes of that failure earlier this week.” – Paul McAleese, Shaw
“Simply put… (EIPs)… are really just a massive price increase wrapped up in a fancy financing bow. We think Canadians are smart enough to do the math on that. It's painful.”
McAleese said the incumbents did the math so that EIPs would pay for the service rate reductions, but the early indicators are that it’s not working.
“They collapsed much of their rate plan umbrellas, but their ambition to coincidentally introduce EIPs to pay for those rate reductions has clearly not come to fruition. You saw echoes of that failure earlier this week,” he added.
“We’re going to continue to use device pricing to distinguish Freedom from our competition – and we don't take direction from the competition on phone pricing. So, the promise of a $75 unlimited plan and a subsidy-free EIP isn't one that we plan on adhering to. We could make that promise, but we're not going to be able to keep it.”
