After months of saying the time was not right to get into the cellular business, Shaw Communications will take initial steps this year towards adding wireless service to its cable TV, Internet and phone offerings.
However, the Calgary-based cable company is still being tight-lipped about timing of network construction and going into business.
“To the extent that we can be stealth-like, we’re going to be that way,” vice-chair and CEO Jim Shaw told financial analysts Thursday.
In a conference call Shaw said his company – which spent $190 million at the 2009 AWS spectrum auction for licences largely in the western provinces – has raised some $650 million for building the network.
However, he left all options open, including the possibility the cableco may try to save some money by partnering with a Canadian or foreign cellular carrier. Industry analysts have complained that new licence holders such as Toronto’s Globalive Wireless Management Corp. and Toronto’s DAVE Wireless have rushed to build separate wireless networks rather than co-operate to save money. They, of course, are startups and need to watch their pennies.
But Shaw, whose company has some $900 million a quarter in revenue, said his $650 million bankroll means he can partner or go it alone.
Unlike most other new licence holders, who after the auction quickly set plans in motion to launch service either late 2009 or early 2010, Shaw professed not to be in a rush. That led some industry analysts to speculate that the cablco didn’t want to get into wireless but had bought spectrum as an investment to sell. However, others believe that Shaw very much wants to add the lucrative and fast-growing wireless business to his products.
Asked specifically by a financial analyst about the possibility of having a carrier partner, Shaw was vague.
“We’re probably focused more now on just making sure the [mobile] platform works correctly, on equipment suppliers – how we source that – how we’d operate the network, billing. Those kinds of issues that are really more fundamental (than carrier partnerships),” he answered. “We feel the partnership thing will come when the time comes, and that could be anybody from Bell (BCE Inc.) to Telus (Corp.), Rogers (Communications) to a U.S. partner, given the recent [federal cabinet] decision on Globalive. So I don’t think that we’re at that stage yet. As you know Shaw doesn’t need any funding, so it would be a question of whether they brought something to the table that would be of help to us, like maybe tower sharing or equipment sharing or something like that. So I think we have a lot of questions that we’re pouring through.”
He’s still not concerned about not getting into wireless as quick as others. “We weren’t the first on the Internet, but turned out to be the best on the Internet and most profitable,” he explained. Instead, he explained the cableco is taking a patient look at what it will take. “We’re worried about (wireless) cost structures and that,” he said. “We bring a lot to the party, given that we’re the largest video provider in Canada. With 3.4 million subs (subscribers), we’re bigger than Rogers or anybody else, so we bring a lot of customers to the party. We’re just taking a careful approach and making sure that if we do anything it’s the right move off the start.”
Telecommunications industry analyst Mark Goldberg said that not much should be read into Shaw’s comments on partners. Partners can include equipment manufacturers or long-distance roaming carriers, he said. As for the possibility of hooking up with a foreign carrier as Globalive has controversially done, Goldberg noted that foreign investment in a Canadian carrier isn’t forbidden – it’s a matter of how much.
Last fall the Canadian Radio-television and Telecommunications Commission said Globalive was offside Canadian foreign ownership and control laws because of the investment of Egyptian-based Orascom Telecom S.A.E. However, in December the federal cabinet over-ruled the commission and said Globalive’s corporate structure is okay. At the same time, it said that ruling was not a precedent.
It isn’t known whether Shaw will follow Public Mobile in demanding the Globalive cabinet ruling be open for all.
Shaw is the primary cable provider in the West, and its cable footprint extends into southern Ontario thanks to the recent purchase of Hamilton’s Mountain Cable. However, its wireless licences don’t reach into Hamilton, or the nearby Toronto area.
Quebecor’s Videotron cable division (already reselling service from Rogers but as of last year a new spectrum holder), DAVE Wireless (which will have a different go-to-market brand) and Public Mobile are expected to launch before Shaw. Halifax’s Bragg Group, which also won licences last year, may also get into the business this year. While it has been mum about its plans, sources say the company has been talking to equipment suppliers.
When all of these start their wireless businesses, buyers will have a choice of seveb carriers who operate in more than one province (Bell, Rogers, Telus, Wind, DAVE, Bragg, Shaw) plus three single-province carriers (SaskTel, ManitobaTel and Public Mobile. Quebecor bought spectrum in Ontario, but it isn’t known whether it will use it.
Shaw can afford to be patient. Unlike Globalive (which operates under the Wind Mobile brand), DAVE Wireless and Public Mobile, Shaw will be able to offer the prized quad-play package of cable, home phone, Internet and wireless to customers – including the ability to cut prices if customers buy more than one service. Some 75 per cent of Shaw cable customers also subscribe to Internet.
Also on Thursday, Shaw announced its first quarter results. Net income was $114.2 million for the quarter compared to $123.5 million for the same period last year. On the other hand, that represented a drop of $10 million compared to the fourth quarter of fiscal 2009. Consolidated revenue for the quarter was $906 million.
The number of digital phone lines Shaw sold increased 61,461 during the quarter. Of that about 10,000 were bought by businesses. Business phone sales are “a high growth area,” Brad Shaw, the company’s senior vice-president, told financial analysts. The number of VoIP lines Shaw provides now totals 923,365 lines.