CALGARY – Shaw Communications executives acknowledged yesterday a shift in strategy when it comes to selling home phone to its customers. In effect, it’s loosening its triple play bundle for those who want that option.
The company surprised the Bay Street analyst community yesterday with a measurable drop in home phone subscribers of more than 12,000 in Q2 2015, which is in stark comparison to an addition of more than 8,000 in the same quarter of fiscal 2014.
This is part of the company’s plan, said Shaw EVP and COO Jay Mehr, when quizzed about it by analysts during Tuesday’s Q2 conference call. “We have had a shift in strategy in how we approach home phone. We used to move forward very much with triple play bundles and trying on promotional bases to onboard all of our customers to the triple play… so it was really to your incentive to take the triple play, whether you wanted it or not,” he explained.
Allowing customers to buy one service is at a time is something the company simply had to begin offering, said Mehr, in order to hang onto the customers who want the choices – and to maximize what the company can earn from those who really do like having a home phone. “We want our customers to take the services that they value and as a result we had an understandably tough home phone quarter and I think we’re going to have a tough home phone quarter for the next quarter or two, as we work our way through those six month promotions.
“I understand that sounds counter-intuitive to the approach we were taking in 2008 and I hear in your comment you might think we’re early, in 2015, to start to take a segmented approach (but) we’re confident that by 2017-2018, we’re all going to be doing that,” he said.
What’s been happening, explained Mehr, is that Shaw had good success getting customers to take the triple play, since phone service was all but free for that time, but after six months, when regular pricing kicked in, many were dropping home phone. The churn rate on that product was quite high, he said. The people who were talked into home phone because of it’s non-existent price tag at the start of the promotion “overwhelmingly disconnected at the end of six months,” added Mehr.
“We’re interested in selling home phone to people who want home phone… We know with Generation Xers and Boomers with kids that 87% of those customers have home phone – and we want to be their home phone provider. We know that for empty nest couples, 93% of them have a home phone; we know that empty nest singles, 81% have a home phone; and millennials with kids, even, 75% have a home phone.”
“For us to… try and force a university student who is moving away from home for the first time to take a triple play bundle in his or her university dorm, we don’t think is in the long term interests of our business –we think we should sell that customer more internet.” – Jay Mehr, Shaw Communications
So while Shaw thinks it can earn more revenue on home phone (a product with 80-90% margins, according to the analysts) from the customers who really like the service, it absolutely needed to start segmenting its product offerings to better serve customers who have zero interest in it. “For us to… try and force a university student who is moving away from home for the first time to take a triple play bundle in his or her university dorm, we don’t think is in the long term interests of our business –we think we should sell that customer more internet,” added Mehr.
The company told the analysts to expect another couple of quarters of bad news on the home phone front as those on six month promotions who want to dump home phone, cut out that part of their bundle as the year goes on, but that the company expects it to stabilize after that, even though, as the analysts pointed out, there is an ongoing generational shift away from wired phones to wireless-only households.
“We have a bucket of customers on the margin that are in a triple play bundle and are going to churn off phone when they go to regular pricing because, in essence, we put them in a triple play bundle in order to get the RGU. So, the one time impact is just to let that group flush through the six month promotions,” Mehr continued.
“We don’t disagree with you that there’s also a generational shift around voice, but we don’t think there’s anything unique to Shaw in that and… we think home phone, as a product, for the segments that we talked about… is going to be viable for a long time.”
