Big Three pricing has been ‘erratic’: Shaw’s McAleese

After taking credit over the summer for the reduction in wireless pricing in the Canadian market, Shaw Communications Inc. is now blaming the incumbents for driving down the market with “erratic” pricing competition over the summer and through to the holiday period. Responding to a question from Scotiabank financial analyst Jeff Fan about the reported lower rate of wireless adds, subscriber additions as well as increased churn, Shaw’s president of wireless Paul McAleese said on Monday’s first-quarter earnings call that the incumbents “haven’t exactly been paragons of pricing discipline during this period.” Shaw announced 66,865 post-paid wireless subscriber additions for the three months ending on Nov. 30, down from the 86,067 the company added in the same period in 2018, and less than the financial analyst consensus estimate of 74,000. The company also lost 8,954 prepaid wireless subscribers, less than the 20,452 subscribers they lost in the same quarter a year previously. Shaw now has 1.72 million total wireless subscribers across pre- and postpaid. Postpaid wireless churn was also up from 1.28 per cent to 1.50 per cent, “a result of the aggressive competitive offers available in the market during the quarter,” according to the company’s released first quarter earnings report. Average revenue per user (ARPU) for the wireless sector was up one per cent year-over-year, to $38.76 from $38.39, reflecting “the increased number of customers that are subscribing to higher value service plans,” according to the company’s earnings report. “Since the launch of unlimited plans last summer, they’ve been fairly erratic, and that Black Friday through Christmas period is really no different than that,” McAleese said of the competition from the incumbents in the weeks following the close of Q1. “We’ve seen a significant break with convention from the incumbents in the last little while. In the last number of months, it's been them that’s led the market down, with pretty significant first mover and very expensive spender programs,” he said, pointing to large handset subsidies, discounted second lines, gift cards, and “desperate” win-back programs that have driven down prices over the holiday period. “You put all of that into the kettle, and I think the sheer scale of that spending in recent months suggests that some of the calculus involved in moving to unlimited so aggressively might have been miscalculated, certainly if it wasn’t at least mistimed,” the Freedom president said of the bigger competitors. But on the company’s third-quarter conference call in June, both Shaw CEO Brad Shaw and McAleese took credit for the move toward bigger and cheaper data plans. Shaw “permanently changed the Canadian wireless industry with our big gig plans,” the CEO said in June, which forced the incumbents to drop their own prices in order to compete. “For the Big Three, these new rate plans offer a dramatic about face from the expensive data overages that their customers have been paying for years,” Shaw told analysts at the time. “If wasn’t clear before, it certainly is clear now. So It’s nice to see the incumbents coming down and sorta chasing us in that regard,” McAleese said on the June call. When Shaw’s Freedom Mobile introduced its “big gig” plans back in 2017 — offering a base rate 10 GB of data for $50 a month — it sent shockwaves through the broader wireless industry, with the incumbent providers quickly following suit. Just over a year later in November of 2018, Freedom Mobile upped the ante, introducing a limited offer of 100 GB for customers already on the Big Gig plan. Since the Big Three major providers either introduced or said they will introduce “unlimited” or “no overage” data plans, wireless prices have fallen across the country. They have also been falling everywhere else, too. Elsewhere in the report, Shaw lost 57,451 wireline subscribers in the quarter, up from the 52,811 the company lost a year previously. Within wireline, the company lost 66,353 consumer wireline subscribers and gained 8,902 business wireline subscribers. Wireline revenue was down 1.5 per cent to $1.07 billion from $1.08 billion the previous year. The wireline numbers include television, home internet, and phone subscriber subscriber figures. Shaw lost 13,948 cable subscribers, down from the 23,768 subscribers they lost in the same period last year, for a total of 1.46 million total subscribers. Shaw added 5,648 home internet subs, almost the same number they added a year ago, making for 1.92 million total home internet subscribers. “Through the launch of BlueCurve Total and Freedom Home Internet, the Company continues to improve its customer segmentation initiatives and remains focused on growing Internet subscribers, primarily through two-year ValuePlans, and on attracting and retaining high quality Video subscribers,” the earnings report read. The company reported 7.15 million total subscribers, just 460 more than they had a year ago. Total revenue for the quarter was up 2.1 per cent from $1.35 billion in the first quarter of fiscal year 2019 to $1.38 billion the first quarter of this year. According to the quarterly report, the increase was “primarily due” to a $46 million increase in wireless, up 16.9 per cent to $318 million from $272 million in the first quarter of 2019. The revenue increase amounts to a 12.9 per cent decrease in net income, from $186 million in the first quarter of 2019 to $162 million this year, much of it owing to the “the impact of the $10 million recovery of restructuring costs recorded in the fourth quarter of fiscal 2019 as a result of approximately 90 employees either rescinding their acceptance of the package with the approval of the Company or forgoing their package to expedite their departure date,” according to the report. — With reporting by Michael Lee-Murphy at mleemurphy@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Big Three pricing has been ‘erratic’: Shaw’s McAleese

News | January 13, 2020

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