The rate at which mobile phone subscribers left Shaw Communications Inc. accelerated during the most recent quarter, despite a net increase in wireless customers, as competition from larger rivals intensified.
Shaw’s regional carrier Freedom Mobile added approximately 67,000 net new postpaid subscribers during the quarter ended Nov. 30. (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.)
Meanwhile, churn – which represents the rate of customer turnover on a monthly basis – among Shaw’s postpaid subscribers rose to 1.5 per cent during the quarter, up from 1.28 per cent a year ago.
The company blamed aggressive tactics from the incumbent carriers – BCE Inc., Rogers Communications Inc. and Telus Corp. – for its increased customer turnover.
Paul McAleese, president of Shaw’s wireless division, said that since Black Friday, the incumbents have been launching “fairly desperate” programs aimed at winning back customers, including offering larger phone subsidies, “massively discounted” second phone lines and pricey promotional gifts such as Sonos speakers and Apple watches.
“The incumbents haven’t exactly been paragons of pricing discipline during this period," Mr. McAleese said during a conference call Monday to discuss Shaw’s quarterly results. “In the last number of months, it’s been them that’s led the market down.”
But Shaw has not deviated from its strategy during that time, Mr. McAleese added. "We’re still executing exactly as we’d hoped to.”
Freedom Mobile has for some time offered plans that reduce customers’ download speeds instead of charging them fees after their data limits have been surpassed. But last summer, BCE, Rogers and Telus all started offering similar unlimited data plans, increasing competitive pressure in the wireless space.
Shaw’s wireless unit, which operates in British Columbia, Alberta and Ontario, earned $71-million in adjusted earnings before interest, tax, depreciation and amortization during the quarter, up 61.4 per cent year over year.
Despite that growth, the Calgary-based company’s overall profit was down in the first quarter of fiscal 2020. The company reported quarterly net income of $162-million, down approximately 13 per cent from a year ago when it had $186-million in net income. The earnings amounted to 31 cents a share, compared with 36 cents a share during the same quarter last year.
Shaw said the lower profit was primarily due to $23-million of equity income it recorded a year ago stemming from its investment in Corus Entertainment Inc. Shaw sold its shares of Corus last May.
Royal Bank of Canada analyst Drew McReynolds called it “a decent quarter for wireless in a competitively intense environment.”
But there are indications that the competitive pressures have begun abating in recent weeks, according to Bank of Nova Scotia analyst Jeff Fan.
“This could be seen as temporary competitive pressure driven primarily by the incumbents during the November holiday period that extended into December,” Mr. Fan said in a note to clients.
Shaw’s considerably larger cable division, however, continues to face challenges. Its revenue declined 1.5 per cent from a year ago to $1.06-billion as its television subscribers dwindled. The consumer cable division lost 66,353 subscribers during the most recent quarter, even as it added 5,648 internet customers.
Overall revenue for the quarter totalled $1.38-billion, up 2.1 per cent from a year ago, when Shaw reported $1.35-billion in quarterly revenue. The company said the results included the impact of accounting rule changes.
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