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Cable/Video

Shaw sees COVID-19 hit, but not as bad as expected

As might be expected, Shaw Communications suffered revenue and net income drops in its latest fiscal quarter due to the impact of the COVID-19 pandemic. But the large Canadian cable, satellite and wireless provider fared better than Wall Street expected as key parts of its business began bouncing back a bit.

Shaw – one of the two largest communications service providers in Canada with 1.9 million Internet, over 1.4 million cable video, nearly 700,000 satellite video and almost 1.8 million wireless subscribers on the residential side – reported late Friday that its net income for the quarter ended May 31 plunged 18.9% on a year-over-year basis to C$184 million ($135 million US). That drop came as the company's overall revenue slipped 0.8% to C$1.31 billion ($963 million US), or 35 cents per share, because of subscriber losses across the board even in its usually vibrant broadband business.

Still, the revenue and net income declines were not as severe as financial analysts had expected, given the pandemic's impact on the Canadian economy over the past few months. Analysts had also been bracing for worse financial results because Shaw executives released the results late on a summer Friday afternoon, typically a time when bad news is delivered to the market.

"Overall, we delivered Q3 results that were ahead of our expectations, reinforcing the essential nature of connectivity services and our ability to manage costs quickly and effectively in our business," Shaw CEO Brad Shaw told analysts in a late Friday conference call. "That having been said, COVID and its related challenges will be a part of our story for the foreseeable future."

The novel coronavirus certainly infected Shaw's results. Looking first at the wireline side of the business, the company continued bleeding pay-TV customers in the spring quarter, shedding nearly 22,000 residential cable video and another 110 satellite video subscribers. While the cable video losses were slightly smaller than in the year-ago period, the provider has still lost about 100,000 consumer video subscribers in the past nine months. As a result, even with its typical annual rate hikes, Shaw saw its overall video revenues dip from the same period a year earlier.

More surprisingly, Shaw suffered a loss of broadband subscribers in the spring quarter even as stay-at-home orders forced most Canadians to do work or school from home. The company shed about 5,100 residential Internet subs in the quarter, a reversal of its gain of more than 6,600 subs in the year-ago period. (We'll have more to say about Shaw's broadband results in a story on our sister site, Broadband World News, later Monday.)

With an additional loss of nearly 22,000 residential cable phone customers, Shaw dropped a total of 55,300 consumer wireline revenue generating units (RGUs) in the third quarter. That represents a bigger loss than a year ago, when it shed approximately 35,200 consumer wireline RGUs. In its earnings report, the company blamed the higher RGU losses on "lower new customer activity and promotions primarily related to COVID-19."

The numbers story wasn't much brighter on the wireless side of the business. Despite gaining 2,236 postpaid mobile subscribers, Shaw shed a total 5,465 mobile customers because of a loss of 7,701 prepaid subs. The company blamed these results on the closure of approximately 90% of its corporate stores during the spring and its focus on "serving its existing base of customers."

In their report to investors and on their call with analysts, Shaw executives pointed to a few unexpected silver linings from the pandemic. For instance, the churn rate for their postpaid Freedom Mobile wireless service plummeted to a record low of 0.96% in the third quarter, down from 1.18% in the same quarter a year earlier. They credited that achievement to "muted subscriber acquisition activity due to the temporary retail store closures and stay-at-home requirements" tied to COVID-19.

Shaw officials expect their wireless subscriber numbers to improve, as well as their churn rate to go up, as the company gradually re-opens its Freedom Mobile stores in malls and other locations across Canada. In recent weeks, the company has re-opened more than 50% of its shuttered stores but hasn’t seen traffic return to pre-pandemic levels yet.

With Shaw performing better than Wall Street's expectations, the company's share price rose in trading earlier Monday. As of 3:30 p.m. EST, its shares were trading at C$23.77, up 5.8% on the day.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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