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Shaw Communications Inc. plans to expand its surging wireless business into new markets over the next year while its cable and internet operations flounder in a tough fight for subscribers.

The Calgary-based company said on Thursday it added 85,000 new wireless customers in its fiscal fourth quarter, which ended on Aug. 31. That easily beat analyst expectations for about 63,000 additions and came as average monthly billings at its Freedom Mobile division rose 9 per cent as it sold more expensive data plans and was able to offer the iPhone to customers during the crucial back-to-school shopping season.

Shaw executives said the company will expand Freedom’s network coverage into new urban markets – naming Victoria as well as Red Deer and Lethbridge in Alberta – and hopes to reach an additional 1.3 million potential subscribers.

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Led by the strength of the wireless division and buoyed by cost-cutting on the cable side thanks to a dramatic employee buyout program, Shaw reported financial results that beat analyst estimates and forecast profit growth in the range of 4 per cent to 6 per cent for its current fiscal year.

But those headline numbers covered significant subscriber weakness at Shaw’s cable division, which still represents the vast majority of its revenue and profit, leaving several analysts worrying that the legacy business will drag down its ascendant wireless operation.

Canaccord Genuity analyst Aravinda Galappatthige downgraded his rating on Shaw’s stock from a “buy” to a “hold” on Thursday. “Not only has the downswing in net [cable and internet subscriber additions] been substantial and persistent, it appears to be worsening,” he said. “Given that about 90 per cent of consolidated EBITDA is cable and the prospect that continued weakness here can drag the investment narrative away from wireless, we feel that moving to a hold rating is the prudent step.”

In a conference call with investors, Shaw chief executive Brad Shaw touted the strength of the wireless business. “Our wireless service is now even more accessible to Canadians,” he said, pointing to a move to distribute Freedom Mobile products and service at more than 200 Walmart Canada Corp. and Loblaw Cos. Ltd. retail outlets in Ontario, Alberta and British Columbia in addition to its own corporate stores.

Paul McAleese, president of wireless, said selling Freedom Mobile in Loblaw’s the Mobile Shop outlets meant that the company was competing in the same retail space for the first time with the national carriers: BCE Inc., Rogers Communications Inc. and Telus Corp. (as well as their various subbrands).

Freedom has also been investing in network improvements and had a 22-per-cent increase in subscribers over the full year to more than 1.4 million. And average revenue per user increased by 9 per cent to $41. That’s a significant pace of growth and the company still has much room to grow compared with the national carriers, which all report average billings per user of more than $60 a month.

However, on the cable side, the company lost 34,000 television subscribers and 2,000 internet customers in the fourth quarter, both falling well short of analyst expectations.

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Shaw president Jay Mehr acknowledged that Telus, the company’s main competitor in the West, “won” the fight for back-to-school television and internet customers this year. But he said he expects running a “leaner” cost structure will pay off.

About 460 employees left the company in the fourth quarter, bringing the total number of departures to about 1,300 since Shaw announced a voluntary buyout program in January.

Shaw said on Thursday it had total revenue of $1.34-billion in the quarter, up 7 per cent and in line with analyst forecasts. Operating income before restructuring costs and amortization was $560-million, up 16.9 per cent and beating consensus estimates of $551-million.

Net income from continuing operations was up 34 per cent to $200-million, or 39 cents a share (straight net income was higher at $481-million in the fourth quarter of last year due to a gain on the sale of Shaw’s U.S. data-centre business, ViaWest).

Mr. Shaw also addressed the company’s potential sale of its stake in media company Corus Entertainment Inc. (Shaw owns 39 per cent of Corus’s non-voting shares, which it acquired after selling its Shaw Media content business to Corus in 2016, while the Shaw family owns the majority of the voting shares in both companies.) The Globe and Mail reported in June that Shaw had hired bankers to seek a buyer, but none has emerged and, in the intervening months, Corus’s share price has remained depressed, hovering in the range of $5.

“We want to clarify that we remain supportive of Corus and their management team. While it remains a challenging structural environment, we think their stock is undervalued,” he said. “We will not look to sell our stake at these current levels and do not need additional liquidity from Corus.”

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Corus shares were initially up more than 4 per cent on Thursday after Mr. Shaw’s comments, but they closed down 2 cents at $5.05.

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