CALGARY – With voice customers growing at a good clip, Shaw Communications Thursday announced net income of $45.8 million in the second quarter, compared to net income of $5.7 million for the same quarter last year.
Net income for the first six months of the year, ended February 28th, was $121.5 million, up from $50.4 million last year.
Total service revenue (Shaw Cable plus Star Choice plus other services) of $611.2 million and $1.2 billion for the three and six month periods, respectively, improved 11% and 10% over the comparable periods last year. Consolidated service operating income before amortization of $267.9 million and $523.2 million increased by 10% and 9%, respectively, over the comparable periods. Funds flow from operations increased to $208.3 million and $405.5 million for the quarter and year-to-date compared to $176.6 million and $346.9 million in the same periods last year.
Customer gains continued across all product lines with Internet and digital subscribers both increasing 3% during the quarter, adding 36,296 and 18,594 subscribers, respectively. Digital phone lines increased to 118,669 with growth of 28,018 for the quarter. Basic cable increased 6,838 in a quarter historically marked by declines in basic customers and DTH added 6,843 subscribers posting its fifth consecutive quarter of subscriber additions.
"During the quarter, we launched Digital Phone in Vancouver and celebrated our one year anniversary of the first launch in Calgary. We recently enhanced the product to include 1,000 international long distance minutes per month and are offering three month promotional pricing to new customers. As a result of these initiatives and the expansion of our footprint in March to Fort McMurray and Calgary’s surrounding areas, including Airdrie, Cochrane, High River and Okotoks, we have seen an increase in the pace of Digital Phone sales during the early part of the third quarter," said Jim Shaw, CEO.
"Both of our divisions continue to achieve the milestones we have targeted and are contributing to the success we see to date in fiscal 2006. We expect solid performance to continue through the remainder of the fiscal year and are updating the preliminary guidance previously issued in October 2005. We estimate service operating income before amortization for fiscal 2006 will range between $1.045 – $1.055 billion. With the increase in our customer base this year, it is anticipated that success-based and other capital related to growth will be higher than initially expected. As a result of this increased capital spending, our free cash flow guidance remains at $200 – $210 million."
Cable division service revenue increased 13% for the quarter to $449.2 million and 12% on a year-to-date basis to $880.3 million as a result of customer growth and rate increases. Service operating income before amortization for the three and six month periods increased 7% to $213.4 million and $420.9 million, respectively.
The satellite division’s service revenue increased for both the quarter and year-to-date by 6%, to $162 million and $320.5 million, respectively, primarily due to rate increases and customer growth in DTH. Service operating income before amortization for the quarter increased by 21% to $54.5 million and by 20% to $102.3 million on a year-to-date basis. The improvement was largely due to growth in DTH revenues and reduced costs.
"The outlook for the remainder of fiscal 2006 is positive. Our focus will be to expand the footprint for our Digital Phone services, manage and control our capital investments to support the growth in the business, and achieve the higher guidance," said Shaw.
While discussing the company’s voice offering, Shaw also disclosed that the company is well on its way to becoming a full fledged competitive local exchange carrier in the eyes of the regulator. Once this move is complete, the company will no longer have to rely on Bell Canada for a link to the public exchange, thus saving money. This move is expected in the summer, said company president Peter Bissonnette during Thursday’s conference call with financial analysts.
"We will be a full blown CLEC and will be able to do things on our own rather than use Bell," he explained, likening the launch of VOIP and the reliance on Bell to when Shaw was reliant on @Home for Internet services when high speed cable modem service was new.
Once Shaw is a CLEC, "we have more control over switching, on net off net or to other providers of long distance so we have more attractive rates," said Bissonnette.
