Communications Inc. has turned thumbs down for the time being on joining one of the biggest growth areas of communications companies – the cellphone business.
The Calgary-based cable company astonished some industry and financial analysts this morning by saying it won’t capitalize on the $189 million it spent on cellular spectrum in 2008.
Instead of spending what it estimates would be $1 billion to build an LTE cellular and data network across Western Canada, it will build a network of Wi-Fi hotspots instead.
That way, Shaw [TSX: SJR.B] said, it can leverage the huge number of Wi-Fi-enabled laptops, tablets and smart phones carried people in its coverage area.
At a conference call for financial analysts Thursday morning, CEO Brad Shaw said the cable operator – which this year spent $2 billion buying the CanWest Global television network – said the return on investment on cellular today “was not attractive” and would only create “marginal incremental value” for shareholders.
Competitive conditions have changed since Shaw bought its spectrum, he said. On the other hand, he said, so far the return from Global has been “phenomenal.”
Shaw is talking to Cisco Systems Inc. about being the company’s Wi-Fi equipment supplier and hopes service will start next spring.
He noted several U.S. cable companies have built Wi-Fi networks that offer free service to their cable and Internet subscribers.
“We believe a managed, reliable and secure Wi-Fi product extends our customers’ broadband service and experience beyond the home,” he said. It would also differentiate its Internet service from Western Canadian competitors, he added. “It has the potential to extend all of our current services [television, home phone and Internet] outside of the home, including TV everywhere.”
The next generation of Wi-Fi technology, 801.11ac, will have throughput of 1 Gigabits per second, company officials told financial analysts on a conference call. However, that technology isn’t in the current devices people use.
Shaw won’t build a cellular network “for the foreseeable future,” the CEO said. As for participating in the upcoming 700 MHz spectrum auction, which cellular carriers are eagerly looking forward to because of the spectrum’s efficiencies, Shaw is non-committal. Bidding will depend on the yet-to-be-announced auction rules he said.
That suggests he wants to hear whether Ottawa will again set aside spectrum for new entrants to bid on. A completely open auction would disadvantage new entrants and favour carriers who have deep pockets.