By Greg O’Brien
CALGARY – “To say that the events over the last several weeks have been extremely challenging would be an understatement, both professionally and personally,” Shaw Communications CEO Brad Shaw said today kicking off the company’s second quarter conference call with financial analysts.
Of course, the call wasn’t really about the company’s fiscal quarter, which ended February 29th, but more about what has happened since then with the ongoing Covid-19 pandemic and its fallout.
“We want to express our deepest gratitude to those standing on the front lines doing their very best day in and day out,” Shaw added, singling out doctors and nurses, grocery store workers and those working in transportation as well as employees of Shaw and Freedom who are doing their best keeping customers connected.
“We will emerge from this crisis in an even stronger position,” he predicted. However, the company also suspended its fiscal 2020 financial guidance because there are so many unknowns in the Covid-19 crisis as well as what may happen in the province of Alberta, where Shaw earns a third of its wireline revenues, due to the recent collapse in global oil prices.
In the first weeks of the Covid-19 crisis Shaw moved 5,000 employees to work from home and since then 80% of its approximately 10,000-strong workforce is now working from home. Certain retail employees, technicians and those running its network operations still need to be on sites to do their jobs.
Since the start of the crisis, the company has seen its consumer wireline traffic jump by about 50% and peak traffic, which used to be in the evenings, is now 12 hours a day, seven days a week said the CEO. On the Freedom Mobile side, data traffic has actually fallen as more people’s handsets are running off home Wi-Fi networks, but voice traffic has increased by 25%.
“We’re proud to confirm that our facilities-based network performance has been exceptional,” said Shaw, referencing the wireless policy proceeding still before the CRTC.
“Facilities-based networks are no longer just the backbone of the digital economy, they have become the economic backbone of our country,” he continued. “Facilities-based operators have showcased their strength during this difficult time and we encourage regulators to be mindful of Canada’s relative strength on this front.”
Company executives also pointed to the company’s “total business transformation” executed over the past two years in which the company forced itself to act more digitally and push things like self-installs of TV and broadband equipment harder down its pipeline, while trimming its headcount by 25% thanks to a generous buyout plan.
Thanks to its TBT, prior to the Covid-19 crisis, Shaw had increased its level of self-installs to 50% and since, that number has reached 100%, which in the current environment is very much safer for Shaw employees and customers.
On the wireless side, both CFO Trevor English and new Shaw president Paul McAleese cautioned analysts that while they anticipate wireless churn to drop to historic lows – as consumers hunker down and look less to switch providers – the third quarter will probably be a “lost” one when it comes to subscriber growth.
However, the company is hoping to see stable free cash flow and earnings before interest, taxes, depreciation and amortization due to decreased costs, and the fact that people are unlikely to cut their broadband or phone service. For example, travel and other discretionary spending has been cut, as has advertising and promotional activity. Capital expenditures have also been cut or delayed, said English, who pointed to about $200 million in success-based capex spent in the second quarter as the company chased new home construction, which has essentially been halted, as an example of spending which is being deferred.
The company’s Q2 was a pretty good one, even if those results were secondary to how Shaw Communications and Freedom is responding to the crisis.
Consolidated revenue increased 3.7% over Q2 2019 to $1.36 billion and adjusted EBITDA improved 9.5% to $600 million. Wireless service revenue and ARPU increased 19.6% and 3.1%, respectively, year-over-year as Freedom Mobile continues to grow its customer base, including an additional 54,000 postpaid subscribers in the quarter, bringing its total Canadian customer base to nearly 1.8 million customers.
For more on Shaw’s results, please click here.
