A Shaw Communications sign at the company's headquarters in Calgary.Jeff McIntosh/The Canadian Press
The shaky Alberta economy took a toll on Shaw Communications Inc. in the second quarter as the Calgary company lost more cable customers than expected.
But analysts remain optimistic about the company's prospects as it looks to bring newly acquired wireless startup Wind Mobile Corp. into the fold and begin offering a "quad play" bundle of television, Internet, home phone and wireless services to its Alberta and British Columbia customers, to better take on its western rival Telus Corp.
"Our second-quarter results mark the beginning of our transformation to a pure-play connectivity company," chief executive officer Brad Shaw said on a conference call with analysts Thursday afternoon. The $1.6-billion deal to buy Wind closed on March 1, and Mr. Shaw said the company had about 980,000 wireless subscribers on Feb. 29, which was the end of the quarter.
"We have tremendous confidence in the Wind team to help lead and grow our wireless business," Mr. Shaw said, adding the company also closed the $2.65-billion sale of its Shaw Media television assets to Corus Entertainment Inc. on April 1.
Desjardins Capital Markets analyst Maher Yaghi said the company's quarterly numbers were "in line with Street estimates on the financial side but slightly weaker in terms of subscriber performance. This weakness came mainly from the business side, likely a consequence of the economic impact in Alberta taking its toll." He said not being able to compete with Telus on the "quad play" will "continue to hurt Shaw's subscriber metrics, but this effect should be mitigated by the acquisition of Wind coupled with heavy investments in wireless."
Shaw said it plans to invest $250-million to upgrade Wind's network to the latest generation of cellular technology known as LTE. Wind operates primarily in urban areas in B.C., Alberta and Ontario.
Macquarie Capital Markets analyst Greg MacDonald called the quarter's results "the storm before the calm," stating that while the Alberta economy is affecting the business, particularly through the decline in cable services, he remains "bullish on Shaw's medium-term free cash growth outlook following its acquisition of Wind Mobile."
The company lost a total of 42,000 subscribers in the quarter, which it noted was an improvement over a loss of 44,000 in the second quarter of 2015 and much better than the 65,000 it shed in Q2 of 2015.
Although it added 4,000 new Internet customers, it lost 26,000 cable TV subscribers and 6,000 satellite TV customers along with 14,000 home telephone customers.
Shaw president Jay Mehr told analysts that among business customers, the loss of TV subscriptions in the quarter was primarily due to repackaging of certain bundles that removed cable TV. But he acknowledged that for households, the Calgary-based company lost more customers in areas hit hard by the decline in oil prices.
Shaw said its net income fell 2.4 per cent to $164-million, or 32 cents a share, down from $168-million, or 34 cents a share, for the second quarter last year.
However, the company did report 3-per-cent growth in total revenue in the quarter, as sales increased to $1.15-billion from $1.12-billion as it posted solid numbers for its enterprise services business and also added retail Internet customers.
Shaw's shares fell 3.2 per cent on Thursday, closing at $23.54 on the Toronto Stock Exchange.