CALGARY – Shaw Communications lost more cable and internet subscribers than anticipated during its third quarter, and reported a $91 million loss, while adding a large number of wireless customers.
In a conference call with the financial community after the release of its Q3 results, Shaw executives pointed to the ongoing restructuring of its organizational operations for the disappointing quarter.
The $91 million loss was attributed to a $284 million charge related to its investment in Corus Entertainment. Corus took a large write-down in its Q3 announced yesterday. Shaw showed a $133 million profit in the same quarter a year earlier.
“We are managing a lot of change and that is part of the story,” said Jay Mehr, president, Shaw Communications, on the conference call. Approximately 1,200 employees are expected to depart the company by the end of fiscal 2018, and Shaw expects to cut costs by approximately $8 million by the end of the year.
CEO Brad Shaw added he sees significant growth opportunities ahead and that the “optimized structure will hold our business leaders accountable for driving results and executing better than ever before.”
Shaw lost 16,583 Internet and 2,941 cable subscribers in the quarter, well off analysts’ expectations. Revenue rose 6.9% to $1.3 billion and operating income before restructuring and amortization increased 7% to $541 million. Shaw said it’s still on track to meet its 2018 forecast. Rate increases that went into effect on June 1 should produce an additional $21-23 million in the fourth quarter
Shaw explained the other factors for the lower sales were seasonal student disconnect activity for internet, a shift from bulk accounts from consumers to business, attractive promotions from competitors, and Shaw’s pricing discipline. He stressed, however, that Shaw’s network was in “fantastic shape” and results from one quarter would not impact the company’s long-range plans and goals. However, he added though the overall execution of the wireline business needs to improve.
“We need to be more effective in how we price and package our services, and improve our ability to target customers with more effective offers through better segmentation and spending of promotional dollars with a data-driven approach,” said Shaw, adding such a focus will “significantly enhance the way in which we interact with customers and improve results going forward.”
As previously noted, [link to Cartt.ca story] rumours have been swirling for weeks that Shaw has been looking to sell its stake in Corus, which reported results on Tuesday as well as slashing its dividend to shareholders, including Shaw. Shaw holds a 37% stake in Corus in 2016 when it sold Shaw Media for cash and stock valued at $2.65 billion. The cash from Corus enabled Shaw to purchase Wind Mobile, which was rebranded as Freedom Mobile.
Mehr said he “can’t comment on speculation in the media,” but did add that Shaw’s balance sheet was in great shape and that the drop in Corus’s dividend (which will result in Shaw’s annual dividend dropping from about $90 million to $19 million) would have no impact on current or future business plans.
Brad Shaw began this morning’s conference call by highlighting Freedom Mobile added 54,000 post-paid subscribers in the third quarter and its blended average revenue per user was up by nearly 8% from a year ago. He credited the increase to its Big Gig data plans and network enhancements. Freedom Mobile increased its average revenue per user by 7.5% year-over-year to $39.84 per month aided in part by adding the iPhone to its lineup.
Shaw also announced a new partnership with Walmart which will see Freedom Mobile’s goods and services offered in approximately 140 Walmart locations in Ontario, Alberta and British Columbia. When combined with its existing corporate and dealer store network, Freedom Mobile expects to have approximately 600 retail locations operational in early 2019.
The company’s 5G technical trials concluded last month and Shaw called them a success, explaining that its hybrid fiber coax network can support both 5G multi-gigabyte speeds and the DOCSIS 3.1 infrastructure. Mehr said Shaw currently has 200,000 DOCSIS 3.1 modems that it will be rolling out to customers.
“We are deploying the latest DOCSIS 3.1 modem (XB6) which enables faster internet speeds and our BlueSky [PVR] platform continues to improve and now integrates YouTube seamlessly with live TV, video-on-demand and recorded content.”
Mehr added that Shaw is currently building out its 700 MHz spectrum, which will continue throughout fiscal 2019. Once it’s fully deployed (in 12-15 months), it will enable customers with compatible devices to receive enhanced services.
