CELLPHONE PLANS
With Wind deal, Shaw sets sights on taking on three major players in mobile market,
Shaw Communications says it will preserve the “value proposition” of Wind Mobile’s cellphone packages following its $1.6-billion takeover of the Torontobased carrier.
But while Shaw said pricing will remain discounted, it also signalled plans to eventually narrow the gap between Wind and the big three providers: Rogers, Telus and Bell.
“This is a winning strategy that’s been created, and our plan is to continue on that winning strategy,” Shaw’s chief operating officer Jay Mehr said after unveiling the deal late Wednesday.
Telecom consultant Iain Grant of the Seaboard Group said Wind will continue to be the go-to brand for value-conscious consumers.
Wind’s network is due for an upgrade, he said, “but until then, it is ideal for those that have other uses for their hard earned money than paying Canada’s incumbent carriers.”
Grant added that Shaw’s goal of increasing Wind’s average revenue per user can be met by adding elements of the Shaw portfolio such as Internet or cable services to a Wind subscription.
Mehr said the deal will provide a turnkey wireless operation for immediate entry into the fast growing data and voice market, while expanding Shaw’s footprint beyond Alberta and B.C. where its customer base is concentrated.
The proposed takeover also supports the former Conservative government’s push for a fourth national wireless competitor to challenge the big three, which together control more than 90 per cent of the market. Calgary-based Shaw said the current Liberal regime also endorses the four-competitor ambition.
Shaw’s move was welcomed by analysts as better late than never, with Scotia Capital’s Jeff Fan saying it will “improve Shaw’s competitive position against Telus over time.”
He added that a traditional cellular network would be a complement to Shaw’s Wi-Fi service comprising 75,000 Wi-Fi hot spots in Western Canada.
Expectations of intensified wireless competition drove down shares in B.C.-based Telus, which fell 7 per cent to $37.79 intraday, while Eastern Canada based Rogers and Bell dropped less sharply.
Shaw lost 8.3 per cent to $24.74 amid concerns about how it would finance the deal and the price it’s paying for Wind, which has retail outlets and network facilities mostly in Ontario, Alberta and B.C., along with significant wireless airwave operating spectrum.
Wind is the country’s fourth largest carrier but had less than 3 per cent of the market as of 2014, as it struggles to make inroads on established players and their discount brands. As of the third quarter Wind had 940,000 customers compared to market leader Rogers with 9.8 million and 8.4 million for Telus.
But Shaw CEO Brad Shaw said Wind will realize $485 million in revenue and $65 million in operating earnings this year, calling it the missing piece needed to compete with bigger rivals including Telus on a more equal footing.
Along with fellow new entrant Mobilicity, which Rogers bought for $465 million last summer, six-year-old Wind started life as an underdog small carrier offering services at a steep discount to incumbent peers. As a result, Wind’s blended monthly average revenue per user, or the size of the typical customer’s monthly bill, is well below what the big three command. The Canadian industry’s average revenue per user (ARPU) of $61 is the secondhighest in the world, according to a 2015 Bank of America Merrill Lynch report.
Shaw said the parent company will move to close the gap and increase revenue per user once network updates are complete. He said Wind will continue to operate as a distinct unit under the Wind brand at least initially and its current senior management team including CEO Alek Krstajic.
Shaw provides residential cable TV and Internet, home phone and operates one of two national satellite TV services.
The proposed deal requires regulatory approvals from the Competition Bureau and the Ministry of Innovation, Science and Economic Development, but Shaw expects the transaction to close next summer in the third quarter.
The purchase puts Shaw in line with competitors in offering a full slate of popular bundled services: wireless, television, landline phone and Internet.
Shaw scrapped its previous plans to introduce a mobile network in 2011and two years later signed a deal to sell the spectrum to Rogers.
Last week, Wind Mobile said it had se- cured financing of $425 million from a syndicate of banks to upgrade from 3G to a higher-speed LTE network, which would give it more capacity for streaming video and music on mobile phones.
Mehr said Shaw plans to roll out LTE across Wind Mobile’s network by the end of 2017.