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People walk past the headquarters of Shaw Communications in Calgary, Alta., Wednesday, April 13, 2011. (Jeff McIntosh/Jeff McIntosh/THE CANADIAN PRESS)
People walk past the headquarters of Shaw Communications in Calgary, Alta., Wednesday, April 13, 2011. (Jeff McIntosh/Jeff McIntosh/THE CANADIAN PRESS)

Shaw losing the cable fight on its home turf Add to ...

The erosion of Shaw Communications Inc.’s cable customer base is accelerating amid a heightened rivalry with Telus Corp. in key western markets.

The Calgary-based telecommunications company lost more basic cable subscribers than analysts expected in its fiscal first quarter, which ended Nov. 30, 2011.

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Vancouver-based Telus, which launched its Optik TV product based on Internet-protocol technology in mid-2010, now lays claim to roughly 20 per cent of the market in British Columbia and Alberta, according to one analyst’s estimate. Some expect it to eventually hit 25 per cent, which would be a notable gain since Telus’s market share was insignificant just 18 months ago.

As Telus increasingly encroaches on its traditional home turf, Shaw has reintroduced aggressive promotions to poach and retain customers – a strategy that has pinched its margins in the past. Those promotions, including prepaid Visa cards and time-limited teaser discounts, were launched in December of 2011, which falls in the company’s fiscal second quarter.

While the Visa promotion has now expired, chief executive officer Brad Shaw moved swiftly to quell concerns about the company’s strategy, saying it remains focused on balancing subscriber results and profitability while evolving its overall product offerings.

“Recently, there’s been some concern regarding our approach to the competitive environment,” Mr. Shaw said on a conference call with analysts on Thursday, after the company boosted its dividend and posted a year-over-year increase in its first-quarter profit.

“Promotional activity has been a reality in our business for a number of years and has been embedded in our financial results. In the past, a lot of our promotional activity has been tactical and not necessarily in the public or media spotlight.”

Moreover, he stressed the company’s recent ramp up in mass marketing of those offers “does not represent a doubling-down of the promotional activity as we have simply shifted some of our tactics towards our promotional efforts.”

Shaw has roughly 2.3 million basic cable subscribers, after losing 22,768 in its first quarter – surpassing analysts’ estimates for a loss of about 16,000.

“The losses in cable subs are accelerating, which is not a positive indicator,” wrote analyst Maher Yaghi of Desjardins Securities in a research note to clients. “Shaw has been very aggressive on promotions, which could help subscriber numbers in the next quarter but could come with an associated decline in margins.”

Telus, meanwhile, had 453,000 subscribers at last count in November, noting it had 50,000 TV additions during its latest quarter. “So, really, in sort of a year-and-a-half, they’ve gone from negligible to 20 per cent market share (in Alberta and B.C.),” said Dvai Ghose, an analyst at Canaccord Genuity.

Earlier in the day, Shaw said its first-quarter net profit was $202-million, or 43 cents per share, versus year-ago $16-million or three cents per share. (Its year-earlier results were impact by a $197-million charge.) First-quarter revenue improved to $1.28-billion, but its free cash flow declined to $119-million from $154-million in the same period last year. The company, though, increased its annual dividend by five cents, or 5 per cent, to 97 cents for its Class B non-voting shares, effective March 29.

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