Freedom Mobile is star of Shaws Q4 as cable internet provider transforms

Shaw Communications had a $200-million profit in the fourth quarter of fiscal 2018, down from the same time last year but in line with estimates given significant changes undertaken by the cable, internet and wireless service provider.The company’s Freedom Mobile wireless division was clearly the star of the quarter, as it added 85,014 subscribers — more than double the additions a year earlier — and increased its fourth-quarter revenue by 45.3 per cent from last year.Meanwhile Shaw’s cable video and internet services underperformed expectations, with total revenue generating units (RGUs) declining by 59,231, compared with a gain of 24,352 a year earlier on the strength of its internet offering.“Wireless had an exceptional year, with all of our key performance metrics moving in the right direction,” chief executive Brad Shaw told analysts Thursday in a conference call.“In 2018, we grew our subscriber base by 255,000 — or 22 per cent — compared with (fiscal) 2017, to end the year at just over 1.4 million customers.”Freedom’s subscriber growth gained momentum after the company began to sell Apple products for the first time in December. It also upgraded its network with faster technology capable of using advanced features of most devices.Shaw’s management team said they expected Freedom to continue growth, both in its established markets as well as additional cities including the B.C. capital Victoria and Alberta’s Lethbridge, and Red Deer.The larger part of Shaw’s business, providing home video products by cable and satellite and landline internet service, eked out a small revenue gain despite difficulties winning and keeping customers.“In our wireline business, we delivered F18 results that are consistent with our strategy — to focus on profitable growth and stabilize results,” Shaw said.“I’m pleased with the significant cost savings that we have achieved during the year. However, I believe we can execute better.”In particular, he said, results from Shaw’s home internet services didn’t capture “significant” opportunities during the second half of fiscal 2018, which spanned March through August.Several analysts focused on the weak wireline results, which coincided with a workforce reduction that resulted in 1,300 employees leaving voluntarily by Aug. 31, and the gradual switch to a new generation of video-internet service.Shaw president Jay Mehr acknowledged that the company’s chief wireline rival, Telus Corp. had been effective in winning customers with back-to-school promotions in August.“It’s clear in a competitive marketplace when you win a cycle and when you don’t win a cycle. And they absolutely won a cycle, so no excuses from our end,” Mehr said.Among other things, Mehr said that — in hindsight — Shaw underspent on internet promotions in the month of August.“If I had that to do over, I probably would have spent a couple million dollars more on marketing in August.”He also acknowledged that the voluntary departures, which were made available to all Shaw non-union employees, had affected results when some leaders left. But those who remained were energized and effective, Mehr said.“We’ve got a real nice business here that’s a lot simpler than it used to be. And we’re very proud of how the team is executing.”But Mehr said he doesn’t think there will be a big bounce-back in wireline RGUs going forward, because of a shift in Shaw’s focus towards containing costs and growing margins.“It’s part of how we’ve re-engineered the whole company in the (past) six months,” Mehr said. “I think you’ll see us grow revenue by small amounts on a steady basis, with decent improvement in gross margin and a significant improvement in overall consumer profitability.”Shaw’s net income for the three months ended Aug. 31 was $200 million, or 39 cents per diluted share, down from a net income of $481 million or 96 cents per share for the same quarter last year.Analysts had estimated $199 million of net income, according to Thomson Reuters Eikon.Revenue for the quarter ending Aug. 31 was $1.34 billion, also in line with estimates and up from the $1.24 billion in last year’s fourth quarter.Wireless division revenue, which comes from Freedom Mobile operations in Alberta, British Columbia and Ontario, was $250 million — up from $172 million the comparable period last year.Revenue from Shaw’s wireline operations, which include residential cable television and internet services in Alberta, British Columbia and Manitoba, increased by 1.3 per cent to $1.09 billion.Business wireline revenue was up 6.6 per cent at $145 million but consumer wireline revenue was flat at $942 million as rate changes and higher internet revenue were offset by declines in video and phone subscribers.The company says it will leave its monthly dividends through to at least January 2019.Companies in this story: (TSX:SJR.B, TSX:T) read more

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