Freedom helps boost Shaw’s bottom line
Greater focus on wireless spurs strong growth
TORONTO • Shaw Communications Inc.’s big spending on wireless network upgrades fuelled strong growth at Freedom Mobile over the past year, offsetting lacklustre results in its television and internet divisions that saw the departure of 1,300 employees in a massive restructuring.
In the fiscal year ended Aug. 31, the Calgary-based communications company started selling iPhones, deployed critical spectrum it bought from Quebecor Inc. for $430 million and kicked off a data promotion spree with a plan that offered 10 gigabytes for $60.
It seemed to pay off. Freedom Mobile ended the year with 1.4 million wireless subscribers, up 22 per cent or 255,000 from the prior year, Shaw reported Thursday. In the fourth quarter, it added 85,000 wireless subscribers on contract, more than double the 41,000 it added in the same period last year, and average revenue per user grew nine per cent to $41.
“In a short amount of time, we have created a stronger, high-quality network and are delivering an improved customer experience,” chief executive Brad Shaw said in a statement.
Freedom’s network has historically underperformed the Big Three since it doesn’t have a national network or as much spectrum, the frequencies required to power communications.
But Shaw said wireless investments are the company’s “top priority” going forward as it vies to close the gap between its network and the incumbents’.
Executives credited the deployment of 700 MHz spectrum in Western Canada and Ontario for improving churn rates, the volume of subscribers abandoning the service in any given period.
“This is a completely different product experience than it was a year ago,” Freedom chief executive Paul McAleese said on a conference call with analysts. “I’m pleased to say we continue to see record levels of retention.”
The service improvements have attracted customers that are willing to part with more cash. The average selling price of a phone doubled to more than $800 this year, McAleese said.
On top of that, 36,000 customers ported their numbers to Freedom from another carrier last year, up from 7,000 in fiscal 2017.
Freedom also began competing directly in stores when Loblaws and Walmart added the brand to their roster in approximately 100 and 140 locations, respectively.
Shaw is pleased with the market share it captured when competing side-byside, McAleese said, even as the Big Three launched data promotions he believes were designed to lure Freedom customers.
Next year, Shaw plans to expand its network in British Columbia and Alberta to Victoria, Lethbridge and Red Deer.
It has no immediate plans to launch a Shaw wireless brand, though it plans to start trying to sell Freedom to its wired customers.
For the three months ended Aug. 31, Shaw reported profit of $200 million, down from $481 million the year
WE CONTINUE TO SEE RECORD LEVELS OF RETENTION.
prior where it recorded a gain on the sale of ViaWest, the data centre business it sold for $2.3 billion to fund its spectrum acquisition.
But overall revenue increased 7.4 per cent to $1.3 billion and operating income before restructuring costs and amortization jumped 16.9 per cent to $560 million, in line with analysts’ expectations.
While wireless growth buoyed Shaw’s top line, its television division didn’t enjoy the expected supercharge from its new platform.
Shaw lost 34,000 cable subscribers in the quarter and more than 87,000 in the full year despite adopting the Comcast X1 set-top box, technology also selected by Rogers and Videotron to upgrade their cable offerings.
It lost 1,700 internet subscribers in the quarter, but gained 18,000 for the full year.
The low subscriber numbers stemmed from strong competition during the back-to-school season from Shaw’s top competitor Telus Corp.