Shaw thrown for quarterly loss resulting from Corus struggles

Telco says $284M impairment charge on entertainment firm’s assets won’t affect dividends

Shaw Communications Inc. booked a nearly $300-million impairment charge related to its stake in Corus Entertainment Inc. that pushed the telecommunications company into a third-quarter loss, but its top executives insisted Thursday that there will be no major impact on their growth plans or dividends for Shaw shareholders.

The Calgary-based cable, internet and wireless company, which owns about 38 per cent of Corus equity, said it hasn’t depended on $90 million a year in dividends it had been receiving from the Toronto-based media company.

Corus announced Wednesday that it will reduce its dividends by about 80 per cent, starting in the 2019 financial year starting Sept. 1, and divert the savings to debt reduction.

Corus also said it was writing down the value of its television assets by $1 billion, amid uncertain future earnings due to intense competition for advertising dollars and viewers. The announcements pushed down the Corus share price by about 27 per cent over two days, setting record lows on Wednesday and Thursday. The stock closed at $4.63 Thursday, down almost 10 per cent from the previous close.

The decline in Shaw stock was less dramatic.

Shaw shares closed down 98 cents, or about 3.5 per cent, at $26.76 on Thursday — about the mid-point of its 52-week price range — after the company announced weaker-than-expected earnings that included a $284-million impairment charge on the Corus assets.

Shaw executives declined to comment Thursday on news reports that they may be considering the sale of Corus shares but said the reduction in dividends from Corus won’t affect their communications business.

Cash from the sale of Shaw Media to Corus largely funded its purchase of Wind Mobile, now called Freedom Mobile, which is a key component of the company’s strategic growth and investment plans.

Chief executive Brad Shaw said the company is moving ahead with investments in fifth-generation wireless technology — expected to enable faster wireless networks capable of powering emerging technologies such as self-driving cars — which will be integrated with a new generation of inhome equipment for Shaw’s wireline customers.

Freedom Mobile wireless division added 54,000 postpaid subscribers — ahead of analyst estimates — and ended the quarter with 1.32 million total pre-paid and post-paid wireless subscribers as of May 31.

The company generated $1.3 billion of revenue in the quarter ended May 31, up from $1.22 billion a year earlier, with the growth coming from its wireless, residential internet and business wireline products and services.

Shaw’s wireless revenue for the quarter was $237 million, up 54 per cent from a year earlier, due to a combination of equipment sales and service revenue.

Revenue from Shaw’s business wireline unit increased 6 per cent to $141 million.

But Shaw’s consumer wireline business — which includes Western Canada’s biggest cable TV network — was down slightly at $923 million, as declines in video and phone services offset a gain in internet.

Shaw executives said they weren’t satisfied with wireline sales performance, attributing some softness to price competition from its major rival, which is Telus Corp., and some to seasonal weakness.

“Even after considering these factors, we’re not pleased with the overall execution within our wireline business,” Brad Shaw said.

Shaw reported a loss of $91 million, or 18 cents per share, for the third quarter ended May 31. That contrasted with a yearearlier profit of $133 million or 27 cents per share and analysts’ expectations for net income of 36 cents per share, according the Thomson Reuters Eikon. Shaw Communications acquired nearly 71.4 million Corus non-voting shares, representing 37 per cent of the Toronto company’s equity, when it sold Shaw Media, but the number had grown to 80.6 million shares or 38 per cent of the total as of May 31 as a result of investing dividends in additional Corus stock.

The founding Shaw family controls both companies.

Corus had been completely separate from Shaw Communications from late 1999 until 2016.

“We’re not pleased with the overall execution within our wireline business.” BRAD SHAW SHAW COMMUNICATIONS CEO