Shaw Communications Inc. is cutting back on spending and withdrawing its financial guidance for the year as it braces for the economic double whammy of the coronavirus pandemic and collapsing oil prices.
The Calgary-based telecom provider has reduced its travel costs and discretionary spending and expects that some of the projects it had planned to invest in will be delayed, Trevor English, Shaw’s chief financial and corporate development officer, said Thursday during a conference call to discuss the company’s second-quarter earnings.
The collapse in oil prices, which have fallen 60 per cent in the past three months because of sluggish demand stemming from the pandemic and higher output by Saudi Arabia and Russia, poses a risk to Shaw’s business, Mr. English said.
Roughly a third of the company’s consumer wireline revenue – the money it earns from providing internet, phone service and video to its residential customers – comes from Alberta, while its business division generates about 35 per cent of its revenue in that province.
Shaw also brings in about $140-million in revenue annually directly from the oil and gas and hospitality industries, which Mr. English said he expects will be facing an “uphill battle” for an undetermined length of time.
But Shaw has a number of levers it can pull to protect its free cash flow and its earnings before interest, taxes, depreciation, and amortization (EBITDA), even as it expects revenue to be impacted “to some degree,” Mr. English said.
Just how much Shaw’s revenue could be affected is still unclear, given the uncertainty surrounding the length of lockdowns that will be needed to mitigate the spread of the novel coronavirus that causes COVID-19 disease. As a result, the company is withdrawing its previously issued guidance for fiscal 2020, following a similar move by Cogeco Inc. this week.
“We are still in the relatively early stages of this pandemic, making it challenging to know the degree to which we could be affected,” chief executive officer Brad Shaw said Thursday.
"Our management team is closely monitoring the situation and we are exercising agility and being disciplined with our actions.”
Shaw, whose businesses include Freedom Mobile, added roughly 54,000 net new wireless postpaid subscribers during its second quarter, bringing its total wireless subscribers to nearly 1.8 million. (Postpaid subscribers are those who are billed at the end of the month for the services they used, whereas prepaid customers pay upfront for wireless services.)
The company reported a profit of $167-million, or 32 cents a share, for the three months ended Feb. 29, up 8.4 per cent from a year ago when its profit was $154-million, or 30 cents a share.
Its quarterly revenue totalled $1.36-billion, an increase of 3.7 per cent compared to the same period last year.
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