CALGARY – Fourth quarter net income of $66.4 million was way ahead (130%) of the fourth quarter of 2004 for Shaw Communications.
Driving that big increase was a $31 million pre-tax gain on the settlement of a forward sale contract related to an investment with Motorola which contributed $21.7 million to net income. Even without that investment boost, net income in the fourth quarter, ended August 31st, rose 54%.
Annual net income was $160.6 million, up from $90.9 million last year.
Total service revenue of $563 million for the quarter and $2.2 billion for the year grew 5.9% and 6.3% respectively over the comparable periods.
Consolidated service operating income before amortization of $250.8 million and $982.0 million improved 4.8% and 6.1%, respectively. Funds flow from operations(2) increased to $198.9 million and $763.3 million for the quarter and year, compared to $186.3 million and $694.8 million in the same periods last year.
"This year marked our breakthrough entry into the triple-play market of voice, video and data with the successful launch of Shaw Digital Phone in three major markets – Calgary, Edmonton and Winnipeg,” said Shaw CEO Jim Shaw. “With the addition of 34,113 new Digital Phone customers in the quarter, we now have 56,563 Digital Phone customers (as of August 31st) since our initial launch in February 2005. On October 12th we launched service in Victoria increasing our coverage of homes passed to approximately 35%. Throughout this major rollout, we continued to focus on delivering exceptional customer service and enhancing our products and network infrastructure."
In addition to telephony, customers grew across all other product lines. During the quarter, Internet subscribers increased by 39,804 or 3.5% and on an annual basis, they grew by 147,125 or 14.4% to 1,168,063. This represents industry-leading penetration of 55% of basic cable customers. In Fort McMurray alone, the penetration level of high speed Internet is reportedly over 75%.
Digital subscribers were up 11,167 or 1.9% for the quarter and 57,949 or 10.7% for the year, coming in at 598,484. Basic subscribers were up by 3,733 or 0.2% in the quarter and 20,473 or 1.0% for the year to 2.142 million. DTH (Star Choice) customers increased 8,760 or 1.0% in the quarter and 16,759 or 2.0% for the year, finishing at 844,662.
Q4 DTH growth was much faster than last year’s quarter, where only 1,500 customers were added but overall, Star Choice added 13.5% fewer new customers in 2005 than ’04.
"Free cash flow was consistent with last year, despite the acceleration of capital spending for the rollout of Digital Phone, and was in line with our guidance. Service revenue, service operating income before amortization and earnings all improved over the same periods last year,” added Shaw. “Customer growth and decreased churn reflect the strength of our bundled products and service enhancements. Approximately 48% of basic cable customers now subscribe to a bundled service, up from 42% last year."
Cable division service revenue increased 7.8% for the quarter to $409.1 million (2004 – $379.4 million) and 7.2% annually to $1.6 billion (2004 – $1.5 billion). Customer growth, rate increases and a full year of revenue from the Monarch cable systems acquired in the third quarter of fiscal 2004 accounted for the increases. Service operating income before amortization increased 2.5% to $200.7 million (2004 – $195.8 million) for the quarter and 2.3% to $797.6 million (2004 – $779.6 million) for the year.
Satellite division’s service revenue increased by 0.9% to $153.8 million for the quarter and by 4% to $611.4 million for the year mainly as a result of rate increases and customer growth in DTH. Service operating income before amortization increased by 15.3% to $50.0 million for the quarter and by 20.7% to $184.4 million for the year. The improvement was largely due to reduced costs and growth in DTH revenue.
"Both divisions met expectations for the year. Satellite achieved customer growth in a mature and highly competitive environment and was able to significantly improve service operating income before amortization and free cash flow by concentrating on operating efficiencies," added the CEO.
"We are pleased with our product success and plan to roll out new services rapidly. As we announced previously, our preliminary view for fiscal 2006 calls for capital and net equipment spending to range from $535 – $545 million,” he added.
Capital will be used to accelerate Digital Phone growth (hello, Vancouver); to support ongoing network upgrades and service enhancements in Internet, digital video, HDTV and VOD; and, to start a multi-year project to upgrade and modernize customer management and billing systems to address the future integration of service offerings, offer new services rapidly and respond to competitive dynamics. As a result of the investments required to continue to improve service levels, support growth and deploy Digital Phone, Shaw expects moderate growth in service operating income before amortization in fiscal 2006. Its preliminary view is that it will range from $1.025 – $1.035 billion. Accordingly, free cash flow for fiscal 2006 is expected to range from $200 – $210 million.
