Shaw Communications Inc. is reporting traction in its cable business after launching a new television product, winning more new customers than disconnections for the first time in almost seven years.
After years of steadily losing TV customers to both cord cutting and Western rival Telus Corp.'s IPTV service, Shaw said on Wednesday that it actually added 13,000 cable subscribers in the three months ended May 31.
It was the first net increase in a quarter since the end of its fiscal year in 2010, and the Calgary-based company said the shift was due to a combination of factors, including the premium television service BlueSky TV it first introduced in January.
Shaw also attracted 21,000 new Internet customers in the third quarter, thanks in part to a high-speed promotion it has been pushing since last summer. As customers "bundle" multiple products, the company said the momentum from Internet sales also helped reduce the number of cable disconnections.
The new TV service – which includes a voice-controlled remote for intuitive searching and is based on U.S. giant Comcast Corp.'s cloud-based technology – has been available to all customers in the company's cable service area since April. Shaw president Jay Mehr said it is helping not just to reduce customer turnover but also attract new customers in general.
However, the marketing expenses associated with rolling out the new TV product led to a crunch in profit margins, the company said, reporting that its operating income decreased slightly in the third quarter, slipping 0.5 per cent to $550-million.
That was despite a 2.8-per-cent increase in overall revenue to $1.31-billion, which was roughly in line with analyst estimates.
Profit fell 81 per cent to $133-million, down from $704-million in the same period last year when the company reported a $630-million gain on the sale of its Shaw Media business to Corus Entertainment Inc.
On the wireless side, Shaw's Freedom Mobile business added just 20,000 new customers in the period, coming up short of analyst estimates for around 29,000.
Shaw had 1.1 million wireless subscribers by the end of May, but said two weeks ago it has much greater ambitions, with Mr. Mehr stating the company wants to add "millions and millions and millions" of subscribers to its mobile business, which operates in Ontario, British Columbia and Alberta.
His comments came after the company announced plans to sell its ViaWest Inc. U.S. data centre business for $1.675-billion (U.S.), acquire valuable new wireless airwaves from Quebecor Inc. for $430-million (Canadian) and invest $350-million in putting some of that new spectrum to work in its mobile network.
Mr. Mehr reiterated those plans on Wednesday, noting that it will take "another year or so until we get all of the pieces in place that we'll be able to be a meaningful player," but saying the company is "prepared to make those investments."
Analysts said the company's strong cable subscriber numbers were a high point of the quarter, noting that while Shaw executives had predicted a return to positive growth in cable customers, analyst estimates had been lower. But momentum on cable will not immediately translate to better cash flow, warned Desjardins Securities analyst Maher Yaghi, as "capital expenditures on wireless will likely be ongoing for a couple of years."
Shaw also reported $43-million in restructuring expenses in the quarter, which it said was primarily owing to "employee-related costs." It has recently taken steps to integrate Toronto-based Freedom Mobile more closely into Shaw's Calgary-based business, eliminating duplicated roles in finance and human resources.
The company also said in April it plans to shut down Shaw TV community stations in Vancouver, Calgary and Edmonton, cutting approximately 70 positions, and redirect certain funding to local news programming at Global stations now owned by Corus (a decision made possible by a CRTC ruling last year).