Shaw's main office building in CalgaryTODD KOROL
Facing intense competitive pressure on its core cable and Internet services, Shaw Communications has again delayed the launch of its crucial wireless network.
The company announced the delay until 2012 as it unveiled first-quarter earnings and boosted its dividend by 5 per cent.
Profit dropped more than 82 per cent because of one-time charges related to the acquisition of CanWest Global Communications Corp.'s broadcast assets, but the company still managed to grow revenue around 19 per cent to more than $1-billion. Profit was just over $20-million in the quarter compared to $114-million last year, with earnings per share of 4 cents versus 26 cents last year.
It has been a tumultuous time for the company. Shaw spent $2-billion on CanWest and has been integrating the vast operation into its own as Shaw Media. It has also just shuffled its chief executive officers.
In addition, it has been building a wireless network (the man responsible for it recently quit); its main rival, Telus Corp., has been aggressively pushing its advanced Internet-protocol-based TV (IPTV) product; and a crop of new wireless companies, such as Mobilicity and Wind Mobile, have been signing up clients in Shaw's Western Canadian territory as the company continues to put off the wireless network launch.
But even in a shifting sector, chief executive officer Brad Shaw - who recently took over from his brash and sometimes controversial older brother, Jim, and was addressing shareholders as CEO for the first time on Thursday - was unequivocal about what Calgary-based Shaw is and will remain: A cable company.
"We are first and foremost a cable and satellite provider - we will stay focused on our core business," Brad Shaw said. "The cable and satellite business continue to be highly profitable and generate significant amounts of free cash flow. The environment remains competitive, but we feel that we are well positioned to protect and grow our business."
However, despite a positive financial boost from the newly acquired Shaw Media division, growth in the company's core cable business was precisely the thing that was lacking in the financial results - a surprise for industry analysts. Shaw lost 7,542 basic cable customers in the quarter, likely because of aggressive customer acquisition by Telus, which is also squeezing Shaw's ability to price effectively.
"Pressures on pricing in its core cable business persist," Maher Yaghi, an analyst with Desjardins Securities, wrote in a note to clients. "It appears competition is also taking a toll on Shaw's basic cable customer base. We continue to believe increased competitive pressures are of concern and that the market will require a quarter or two of strong results before believing that current pricing pressure has dissipated."
Several analysts think Canadian cable companies' basic product lags behind the IPTV product being pushed out by the phone companies. IPTV, an Internet protocol-based service, allows viewers to search TV schedules for actors' names, move their viewing from one TV to another or pull up YouTube or Twitter.
On a conference call with analysts, Shaw president Peter Bissonnette enthused about new technologies he saw at the recent Consumer Electronics Show in Las Vegas and said Shaw will roll out a "whole-home media gateway" in the coming months that "will leapfrog other competitors."
However, there appeared to be no such enthusiasm for the pushback of Shaw's wireless network, which is the latest of several similar delays. Mr. Shaw said the company was "excited" by the prospect of launching it, but mindful of being "disciplined" so that it doesn't botch its entry into wireless and mar the reputation of its other telecom services.