In an unstable week for wireless, steady Q4 for Shaw

In a conference call with analysts Friday, Shaw Communications Inc. executives declared that the company is in a good place to weather what one analyst has called a “storm” in the wireless sector. In a summer that saw the introduction of no-data-overage plans across the market, Shaw management this morning told analysts that the company was in a good position going forward. Referring to Wednesday’s lower-than-expected quarterly results from Rogers Communications Inc., Shaw’s president of wireless Paul McAleese said: “I think you saw earlier this week that there is something of a lack of pricing discipline in the market, really across the board. My perspective is unlimited came out below the rate that it probably should have done, and certainly the results you saw earlier this week probably support that.” Rogers’ third-quarter revenues were low primarily owing to a three-times-greater than expected number of customers migrating over to the new “unlimited” plans that emerged this summer, cutting overage revenues by some $50 million. Following the introduction of those data plans in June -- which throttle data usage after a customer reaches their data cap while eliminating overage fees -- prices have fallen across the industry. In notes published in response to a stock sell-off Wednesday, industry analysts were of mixed opinion this week on whether or not the instability meant long-term difficulties for the wireless sector. “We still love what we’re getting here. Absolute zero for us was an absolute home run,” McAleese said, referring to the back-to-school promotion introduced by the company in July. As explanation for Shaw’s relative stability in wireless, McAleese pointed to the strength of Shaw’s wireless subscription adds, which at 91,000 exceeded analyst expectations. He said that 30 per cent of the new additions came at a rate of $75 a month of higher. The quarter’s subscription additions were up from the 85,000 additions during the same period last year, and brought this fiscal year’s total additions to 266,000, up from 255,000 in the last fiscal year. Shaw’s total wireless subscribers now stand at 1.66 million, up from 1.4 million this time last year. In July, Canaccord Genuity analyst Aravinda Galappatthige wrote that the new unlimited plans would hurt Rogers and Telus Corp., while Shaw’s Freedom Mobile would stand to capitalize because its Big Gig plans have existed in the marketplace longer, at rates lower than the Big Three’s new unlimited plans. The simplicity of the pricing plans, Galappatthige wrote at the time, “opens a window for Freedom to capitalize, especially within the market segment that is unwilling to step up to the $75/month level.” “This could lead to the challenger brands taking more of the national net adds than expected, which could be negative for incumbents in particular if this renewed market activity does not stimulate as much volume growth as anticipated,” he wrote. CEO Brad Shaw said on the call that the subscriber numbers were the highest the company had ever done. Elsewhere in the earnings report, Shaw added 11,400 subscribers in its internet division, a strong increase from a loss of 3,000 during the same quarter last year. The company’s total internet subscriber base now stands at 1.91 million, up from 1.88 million this time last year. Television subscriptions continued to decline, with losses of 29,837 for cable and just under 11,794 for satellite, dropping the total subscriber numbers for cable and satellite to 1.48 million and 703,223 respectively, down from 1.58 million and 750,403 last year. Overall revenue in the three-month period ending Aug. 31 was up 1.6 per cent, from $1.33 billion to 1.35 billion. Net income was down just under 15 per cent to $167 million from $196 million in the same quarter last year, which Shaw said in its financial statement was primarily due to “lower equity income associated with the investment in and gains on the dispositions of certain assets in fiscal 2018 partially offset by a decrease in restructuring costs in fiscal 2019.” Wireless ARPU was up slightly to $38.59 from $38.38 compared to the same quarter last year. For the year overall, the increase was greater, up to $38.29 in fiscal 2019 from $37.11 in fiscal 2018. The growth in the metric, the company wrote in its financial statement, is primarily due to the adoption of the IFRS 15 reporting standard, “whereby a portion of the device subsidy, previously fully allocated as a reduction to equipment revenue, is now partially allocated as a reduction to service revenue.” On the call, McAleese said that there was some downward pressure on ARPU due to the company continuing to offer subsidized devices. “It was certainly an expensive quarter from a subsidy standpoint,” he said. “But we got in exchange for that trade was something we would take again and will do again.” Shaw management also told analysts on the call that the company was trimming back its capital expenditures, blaming uncertainty in the regulatory sphere, a common theme this year for the country’s biggest telecom companies. “If companies can no longer have the opportunity to earn an appropriate return,” CEO Brad Shaw said on the call, “they will change their investment profile. Therefore innovation services technologies such as 5G, Internet of Things, and the fundamentals of artificial intelligence, will diminish, along with the service levels that Canadians have been accustomed to.” — With reporting by Michael Lee-Murphy at mleemurphy@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

In an unstable week for wireless, steady Q4 for Shaw

News | October 25, 2019

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In an unstable week for wireless, steady Q4 for Shaw

News | October 25, 2019

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