Two industry analysts are split on whether Shaw Communications’ decision not to build a network next year for its newly-purchased wireless spectrum means the cableco is out of the cellular business before selling a single phone.
“If Shaw was going to start going to build out a network with that spectrum I would think they would have to start doing it in 2009,” says Mark Tauschek of London-based Info-Tech Research. Otherwise, he said, the licences will be up for sale.
Another option Shaw has is wholesaling wireless from another provider as a stop-gap measure, he added, but that move would have to be made next year. With three well-financed incumbents, and new entrants Globalive Communications and Quebecor promising to build networks in 2009 anyone who isn’t building now can’t compete, Tauschek argues.
“This is [Shaw’s] window to get going” Said Tauschek.
Shaw, he suspects, was caught off-guard as the recent AWS auction bid the price of licences up to a total of $4.25 billion. On top of that, “they’re probably going to have to spend several hundred million dollars to build their own network.” With the financial markets in turmoil, Shaw may feel it can’t raise that money now.
But Iain Grant, managing director of the SeaBoard Group, a Montreal-based telecommunications consultancy, says that because Shaw’s brand is widely known across B.C. and Alberta, the telco can afford to delay until it’s easier to raise money.
Grant agrees Shaw has been scared by the financial conditions, but believes construction of its wireless network has been postponed rather than cancelled. He acknowledged that Globalive, which is backed by Egypt’s Orascom investment group, and Quebecor, have been verbally far more committed to wireless than Shaw. Orascom has lots of money, he pointed out, while Quebecor’s Videotron cable division has wholesaled cellular service (from Rogers) for years.
“Shaw is quite comfortable as a leading cable operator offering [fixed] voice and data services to its half of Canada,” Grant said. “Although it was pleased to toy with the idea of adding wireless, in times of economic uncertainty they could postpone for a year without having to worry about it.” But Shaw’s brand and the ability to bundle wireless with other products gives it power.
“As soon as [Jim] Shaw were to scratch his nose and change his mind he’d be a force in the wireless business, no matter what year he decides to start.”
On the other hand, he added, all the other carriers are breathing a sigh of relief that Shaw is out for the time being.
Shaw, based in Calgary, didn’t reply to a request for comment on this article.
Last month another industry analyst predicted Shaw and other new licence holders will do well when the launch service.
Shaw’s new licences include 20Mhz spectrum covering British Columbia and Alberta, as well as 10Mhz licences covering Manitoba, Newfoundland and several cities in Saskatchewan and Ontario. But last week in a press release accompanying its fourth quarter results, chief executive officer and vice-chairman Jim Shaw said the company is reviewing its wireless strategy. “We … believe our entry in this new market should be measured and prudent in light of the developing competitive wireless market dynamics. As a result, we do not currently anticipate making material investments in wireless during 2009.”
It’s not that the company isn’t healthy. For the fiscal year ending Aug. 31 it reported consolidated revenue of $3.1 billion, up 11.9 per cent from the previous year. Net income for the year was $671 million. Internet and digital penetration of its 2.25 million basic cable subscribers stands at 70 per cent and 40 per cent respectively, up from 65 per cent and 34 per cent at August 31, 2007. Digital phone penetration of cable customers who have the service available to them is 31 per cent compared to 22 per cent for the previous fiscal year.
Some analysts have wondered how serious Shaw was about going after spectrum given some of the equivocal statements from the company. In a March press release, for example, it said that any spectrum bought “will provide strategic flexibility as it may be utilized in a variety of ways and in a timeframe yet to be determined as the competitive communication market evolves.”
That led some to think the cableco was buying spectrum merely to sell it after the auction. Four days after that statement the company issued another release cautioning against “speculation drawing direct correlation about its [auction] deposit and its ultimate intention” for licences.
Then immediately after the auction Jim Shaw said in a press release that “customers should see competitive wireless products” from the company, but gave no time frame.
Meanwhile Globalive Wireless has hired Ken Campbell, formerly CEO of European operator Bite Group, as its chief executive, while last week Quebecor said its network will be running in 12 to 18 months. From figures provided by the company, Quebecor estimates it will spend between $245 million and $445 million in Quebec, where Videotron operates, and to cover Toronto, where it also won spectrum.
So far only silence has been heard from Bragg Communications, which won spectrum covering the Martimes and parts of south-western Ontario, and Data and Audio-Visual Entertainment (DAVE), which won spectrum covering southern Ontario and several cities including Victoria, Vancouver, Calgary and Edmonton.