Company adds 60,000 wireless subs in Q4
CALGARY – While so many industries and companies have suffered through the Covid-19 crisis, Canadian telecoms like Shaw Communications have proven resilient because people need connectivity. This pandemic has shown that like never before.
The company’s fiscal 2020 results released Friday were in line with pre-Covid guidance, including adjusted EBITDA growth of 3.7% and free cash flow of $747 million, and included an addition of 60,000 new wireless subscribers in the fourth quarter (which includes Freedom Mobile and newly launched Shaw Mobile), ended August 31st. Wireless service revenue grew 17.4% to approximately $815 million for the year.
While internet subscriber growth was lower than the company hoped and Bay Street expected, Shaw reminded it is focusing on “profitable subscriber interactions,” which led to a 1.4% growth in wireline EBITDA, compared to the prior year.
In 20201, the company expects continued positive adjusted EBITDA growth, capital investment of approximately $1 billion, and free cash flow of approximately $800 million, Shaw announced.
“As Covid-19 unfolded, it cast a dark shadow around the world, however, it also highlighted the critical nature of highly capable facilities-based connectivity services,” said CEO Brad Shaw in the press release. He added the company’s priority remains the health and safety of its employees and the support of its customers and communities.
During the company conference call with financial analysts, president Paul McAleese (above in a file photo) noted the pandemic impact which muted competition earlier in the year, is over and competition is tough, if misguided, as its primary incumbent competitor spends too much to win customers in a mature market – leading to expensive trading back-and forth.
“We face a competitor in Telus, a very, very well managed competitor who continues to spend very aggressively to acquire customers in a mature market. You don’t have to look too far to find a $500 Visa gift card for signing up to a Telus internet bundle,” he said. “You’ve heard me in the past be very plain about our view on the level of swapping between the two companies in a mature market, and we continue to think that’s unnecessary and lost economic rent.”
That means Shaw will be hitting back with Shaw Mobile, as it did this week with the launch of $25 Unlimited.
“So as long as we face that economic pressure… we now have a tool in Shaw Mobile that we will deploy as necessary to meet our business objectives.” While the company takes a hit on wireless margins, the $25 unlimited wireless offer only comes as long as a customer is also a Fibre+ Gig home internet customer, so it makes up for that wireless hit by keeping that lucrative home internet customer with a value bundle.
These are actions Shaw has to take because it’s the fourth player in a four-company national market so when it comes to pricing, “it doesn’t drive this ship,” said McAleese.
“Real growth is at a very, very modest level and the promotional pricing you’re seeing out there is intense… I think any casual observer would come to the conclusion you can’t solve a service revenue problem or an ARPU problem by discounting at this level, particularly when there’s not a lot of market growth.”
McAleese also expressed disappointment at how the Big Three of Rogers, Bell and Telus are pricing their consumer services as they introduce 5G, noting there isn’t much reason for consumers to want to move to the next generation of network technology anyway.
While the industry is talking up 5G “there isn’t really a compelling use case,” yet he said. Company research is showing people want the new iPhone 12, but not for its 5G-ness. That said, “I think the industry may want to reconsider how it monetizes (5G) over time. We’re a little bit disappointed at this point,” he explained. “The signal from the Canadian industry is that it will be not directly monetized specifically, just moved up into rate tiers… I’m not sure it’s necessarily the best thing.
“I was hoping the industry didn’t simply absorb the incremental costs of 5G spectrum and build out into a declining pricing environment,” McAleese continued. “I would have liked to have seen a little more consumer tests to see whether or not there was a capacity and willingness to pay for that. Anybody that operates in Toronto and drives along the the toll road that is the 407 notes sometimes you pay for faster lanes – and you’re willing to do so.
“So the risk here is that we spend billions of dollars on spectrum and build out and simply just absorb it all. I would have preferred to see something that maybe looked a little bit like the 3G-LTE pricing back in the day, where it was a bit of a (price) step up to the higher speed.”
For the full Shaw Q4 release, please click here.
