OF COURSE, UNLESS I CRAWL into the head of JR Shaw and probe his synapses – or see him in a law firm signing documents with Michael Sabia – neither I nor anyone else can answer the question in the headline.
Same goes with all of the Canadian media and cable companies, actually, all of which are controlled by their founding families. No one can really know what’s going on until it happens. Hostile takeovers are impossible.
But, the rumors surrounding Shaw Communications have reached a fever pitch over the past few months. They’re too loud to ignore. In most recent conversations I’ve had with people in the industry, it’s invariably one of the first topics brought up (“What’s going on with Shaw?” they all ask). Most believe something is indeed up in Calgary.
Taking a look at the potential tea leaves, the company could be seen as one prepping for a sale or merger. Or maybe it’s just a company with its own unique strategic direction.
For example:
* Christmas is the time for large consumer marketing pushes, no matter what you sell. And, with 2005 consumers going ga-ga over the latest and greatest tech gadgets and big screen TVs, a big ad campaign to get Shaw-owned Star Choice receivers in more homes would seem apropos. All of its cable competitors and especially its main DTH rival ExpressVu are spending themselves silly this holiday season with promos and marketing – pushing HD and PVRs especially.
Check our Bell’s “Way Better TV” campaign, which is everywhere.
I can’t remember the last time I saw a Star Choice ad, and company CEO Jim Shaw himself told the company’s last quarterly conference call that the company simply is not pushing digital TV. Instead, it is preferring to build its residential cable voice customer base as quickly as possible. So, while ExpressVu added 82,000 customers in the third quarter of 2005, ended September 30th (a 148% increase over ’04), Star Choice added just 16,759 in all of fiscal 2005, ended August 30th (a 14% drop). This is a division in full cost-control, flat-growth mode.
Canadian programmers also confirmed to me that no TV-specific Christmas push is happening on the cable side out west either.
* In Winnipeg, Manitoba Telecom Services has surpassed the 50,000 customer mark. It’s a safe bet that most of these customers – since MTS serves only the city of Winnipeg – have come from Shaw. So, when I went to the Canadian Association of Broadcasters convention in November in Winnipeg, I expected to see a marketing battle royale between the two heavyweights in the Manitoba capital. I searched and the only Shaw branding I saw in the market was the cable channel in my hotel room. No outdoor. No newspaper ads. No buses. Nothing. I was surprised.
* The company has let two senior executives go in the past 12 months that I know of: Barry Middlebrook and Michael Allen. Neither have been replaced. Chief Technology Officer Randy Elliot also retired in October. There’s no replacement for him either and they’re not looking – in Canada anyway – for anyone to come in from the outside. Company president Peter Bissonnette has taken on the CTO’s role. When senior people are not replaced, it gets folks talking.
* Moving towards the CEO, Jim Shaw, he’s been mum on all subjects in 2005. The fact he doesn’t return my phone calls is nothing really new (he didn’t call me back for comment on this piece either, for example). It’s always been hit or miss. Usually, though, I could get a couple of random hits – but not this year.
And, in talking with an investment analyst who covers the industry from his perch within a major bank, the Shaw hierarchy hasn’t been returning that person’s calls either, which is a little surprising. Plus, Shaw was not involved in any of the media confabs put on this year by the investment community, where normally they’re involved in one or two. The only communication out of Shaw has come via those quarterly analyst conference calls and often when companies go incommunicado, it means something’s cooking.
* Did Shaw quit the CCTA just to save itself a bit over $2 million a year? Or does it know something big is coming – like the sale of itself to a telco – and so maybe it decided to cut out, lest it be accused later of gaining cable trade secrets while negotiating a sale to perhaps the nation’s largest telco? Shaw president Bissonnette was chair of the CCTA board after all and leading a strategic review of the association and board members were surprised by the resignation.
* Shaw said at the beginning of 2005 that it would have a wireless play to announce in six months. Of course, that hasn’t happened. Understandable if a bigger transaction is unfolding.
* Finally, since Bell Canada Enterprises is the oft-rumored suitor for Shaw and BCE will have $2.2 billion in the bank by mid-2006, that has further fuelled speculation. Shaw will cost north of $6 billion, but $2.2 bil is a good cash starting point if the rest of the deal is a share structure.
So besides Bell, which other suitors would there be? The only one I can think of is Rogers since getting a Telus-Shaw merger (creating a virtual western communications monopoly) past the Competition Bureau, would be a no-go.
So, can Rogers afford it? After adding Microcell and Call-Net in the past year, it would seem a very difficult time to add more to RCI’s already very full plate. But Ted Rogers has gotten banks and others on side before for many expensive acquisitions – and Ted Rogers would be loathe to let Shaw Cable fall into the hands of BCE.
What if Rogers spun off Rogers Media then to JR Shaw’s Corus Entertainment to help pay for the deal? Rogers might also choose to keep a piece of Corus, like Bell and Bell Globemedia, just to maintain access to the content.
And, if Rogers did acquire Shaw, it could then sell Star Choice, but to who, is the question there.
Two moves like that would make Shaw more affordable for Rogers.
Many, many questions. Many, many rumors. No answers. May mean something big. May mean nothing. Shaw has always been a company to go completely its own way (rather successfully, I might add), so all these tea leaves may, in the end, just be another dirty cup.
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