Shaw Communications Inc. says one quarter of its work force, including its chief financial officer, will take buyouts over the next 18 months as the company slashes costs in a sweeping business overhaul.
Facing declining revenue growth in its legacy television business, the Calgary-based telecom is betting on the future of its still small Freedom Mobile wireless division.
Less than three weeks ago, Shaw gave 6,500 non-unionized employees the option to take voluntary severance packages, but said it expected just 10 per cent, or 650 people, to accept the buyouts; on Thursday, it said 3,300 employees had taken the offer – one-quarter of the company's workforce.
Shaw president Jay Mehr said in an interview that the company did not retain the option to reject buyout applications of employees who chose to take the offer, as the program was designed to give workers control, but Shaw was able to stagger the timing of their departures over the next year-and-a-half.
"Is it a messier way to do it than the old way of management, just deciding and laying off people? It's certainly a new way, it's a generous way," he said when asked whether the company mishandled the layoff process. "We considered a range of scenarios, and the actual uptake falls within what we considered. Clearly, it's at the high end."
Shaw said it will record a $450-million restructuring charge in the second quarter of its 2018 fiscal year, while the actual payments to employees who have taken the buyout will be spread over 18 months. In the longer term, it expects to save $225-million on an annualized basis by 2020.
Shaw is cutting more than 25 per cent of its managers through the buyouts, Mr. Mehr said, including its CFO, Vito Culmone, who will leave the company on May 4. He will be replaced by fellow Shaw executive Trevor English, who will take over a combined finance and corporate-development department.
Mr. English, a Shaw veteran of 20 years, was a key figure in many of the company's recent strategic moves, including the sale of media assets to Corus Entertainment Inc. and purchase of Wind Mobile (now dubbed Freedom) in 2016.
"Trevor's done a terrific job leading us through the strategic acquisitions and Vito's also made an amazing contribution to Shaw," Mr. Mehr said.
"None of this is easy."
He said the company is "letting wireless run, because we have a growth opportunity there," but is looking for a better profit margin for its video service. Cable- and satellite-TV subscriptions have been declining as more customers cut the cord. The company also faces tough competition from Telus Corp. in British Columbia and Alberta.
Shaw wants to trim costs through online or mobile-based options for customer support.
Most customer-facing workers were not eligible for the buyouts, but certain cable installers and technicians were, Mr. Mehr said, adding that the company also plans to move to a less expensive "self-install" model for its television service. The average tenure of staff taking the buyout is 10.6 years.
"Our road map is clear that a broadband connectivity customer goes to the MyShaw app and chooses the video product they want to have in their home.
"Within a couple of hours, a hockey puck-sized device is delivered to their home, they take a picture of the barcode of that device and they have TV working.
"That's an example, but that is right at the core of the total business transformation," Mr. Mehr said.
Analysts said the staff cuts were greater than expected and predicted some risk in how the company will manage the changes over the next year-and-a-half.
They also argued, however, that Shaw needed to overhaul its cost structure to reflect the reality of much lower growth for its legacy television business. Most took Mr. Culmone's departure in stride.
"In our view, it is never a positive for the stock when a respected CFO departs, but, in this case, [Trevor] English is also a well known and respected senior executive who was instrumental in the shift from media to wireless, a move we think was very positive for investors," said Macquarie Capital Markets analyst Greg MacDonald.
Desjardins Securities's Maher Yaghi warned that even with the "streamlining strategy," Shaw remains vulnerable to competition from Telus and added, "we also believe that further hires are possible down the road as the rollout of wireless is likely to require additional staff."