Last week, the future of Shaw Communications Inc. was a lot clearer.
It sold Shaw Media Inc. to related company Corus Entertainment Inc. and will make use of the proceeds to fund its recent acquisition of upstart carrier Wind Mobile Corp.
Should both transactions pass muster by mid-year, Shaw would realize a wireless ambition that’s at least eight years within the making, one that has seen the organization create a $189.5 million purchase of wireless spectrum, begin constructing infrastructure, simply to suddenly stop building, fearing the project’s $2-billion price tag would cripple the organization. Shaw sold Rogers the choice to get its unused spectrum licences in January, 2013.
Even because it was exiting wireless, the organization could see how smitten their customers were becoming with being connected. “The Internet, sent to a range of wireless and wired devices, is changing everything,” chief executive Brad Shaw told investors 2 yrs ago.
After years of mixed signals, Shaw will finally join the wireless fray but will pay a cost because of its tardiness.
“Brad’s instruction to everybody was that he desired to build a Shaw that’s more relevant 10 years from now than it is today and a Shaw that’s more relevant in Two decades than it is in 10 years,” chief operating officer Jay Mehr said within an interview.
But until then, competitors Rogers Communications Inc., Telus Corp. and BCE Inc. have developed a massive head start. The Big Three have taken benefit of the burst in cellular data usage, using expansive retail networks to market pricey smartphones to a growing quantity of customers, bundling other services – such as television and Internet – in to the package.
Wind hasn’t been in a financial position to invest heavily to strengthen its network, lowering the quality of its offering. Wind doesn’t operate an LTE network because of its 940,000 subscribers in Ontario, Alberta and B.C., which handicaps the carrier from increasing its rates. In its third quarter, the discount cellphone carrier generated average monthly revenues per user of $35.81.
It will definitely cost the company $250 million through 2017 to strengthen its network.
Transformed Shaw Communications Inc shifts its focus to being a pure connectivity providerShaw Communications to sell Global TV network, specialty channels to Corus Entertainment for $2.65 billion
Wind won’t considerably of a threat in the trio of provinces where it operates until it rolls out LTE, analysts at RBC Capital Markets said in a recent industry outlook. “Until then, however, we expect little change to the competitive environment in 2016 as Shaw balances growth and profitability and addresses current service quality deficiencies,” they said. And by time it’s set to offer LTE, nearly ten years would have passed.
Shaw pays a hefty sum to reduce the risk of entry into wireless. In September 2014, Wind was recapitalized by a number of private equity firms for almost $300 million. It had coveted spectrum licences in the war chest along with a good chance to acquire more for cheap in future auctions. By December, Wind had an enterprise value of $1.6 billion and it expects to create $65 million in earnings before interest and other items during 2015.
“It’s never too late to do the right thing,” Desjardins Capital Markets analyst Maher Yaghi said recently.
The company has valid reason to jump into wireless now. Subscriber count across segments is within decline, and revenues are starting to flatten. Looking for new revenue, the organization bought ViaWest Inc., a U.S. data centre provider, in mid-2014 and very soon after began an evaluation that looked at models in other countries.
It became increasingly clear that there was a widening hole in Shaw’s offerings: mobile.
Getting during the wireless game would be challenging. Shaw felt its hands were tied with a regulatory regime that has become political and seemed in opposition to consolidation. “We wanted some things to occur to get clarity,” Mehr said. “It was a game of 3D chess.”
When the deal for Rogers to buy Shaw’s spectrum – one that was completed via a series of transactions that led Rogers to purchase Mobilicity and give the bulk of Shaw’s airwaves to Wind – went through, it seemed the tide had changed.
“I believe Wind benefited from some good regulatory rulings, some real support,” Mehr said. “Whether an established player would have been in a position to pull off that same path, I think that is a wide open question.”
In the finish, the Calgary company took the long way into wireless. The sale of their media assets, which Mehr said wasn’t shopped around, constitutes a real media player from Corus (that is controlled by the Shaw family). Since it retained its curiosity about streaming platform Shomi, some pot venture with Rogers, Shaw continues to have a prominent place in what many have to say is the way forward for broadcasting.