Shaw boosts wireless with spectrum buy

Shaw Communications Inc. has doubled down on its strategy to become a serious contender in Canada’s wireless market with a pair of deals aimed at improving its relatively sluggish mobile network.

The Calgary-based communications giant announced Tuesday morning it sold its data centre business and inked a deal with Quebecor Inc. to use some of the proceeds to buy low-band spectrum licences, the 700 MHz and 2500 MHz radio frequencies essential for better network quality and coverage.

It sold ViaWest to GI Partners portfolio company Peak 10 Holding Corp. for $ 2.3 billion, netting about $ 900 million in cash proceeds after purchasing the assets for $ 1.3 billion less than three years ago. The transaction is expected to close by the end of August.

Simultaneously, Shaw announced a $430-million deal with Quebecor for spectrum in Alberta, British Columbia and Ontario. It expects to spend an additional $350 million to deploy the added spectrum in its next fiscal year, which begins Sept. 1. The spectrum transfer is subject to approval from the Ministry of Innovation, Science and Economic Development and the Competition Bureau, but Shaw said it expects the deal to close this summer.

CEO Brad Shaw called the transactions an “important milestone” and expects the 700 MHz spectrum will “materially improve our long-term wireless customer experience.”

“We are pleased that we have entered into an agreement with Quebecor, and we are excited about putting this spectrum to use for the benefit of Canadians,” Shaw said in a statement.

As it stands, the Big Three incumbents BCE Inc., Rogers Communications Inc. and Telus Corp. boast wireless speeds between five to 10 times faster than Shaw’s Freedom Mobile, according to 2016 studies by PCMag and Speedtest Intelligence.

Shaw’s and Quebecor’s stock prices rose on the news, with both up more than two per cent by midday.

The deals came as no surprise to analysts, who viewed the transactions as positive for Shaw and neutral for Quebecor.

“Acquiring 7 00 MHz spectrum is an important development for Freedom Mobile because wireless coverage is set to materially improve for customers,” Citi analyst Adam Ilkowitz wrote in a note to clients.

Improvements in coverage in-building and along transportation corridors could lead to Shaw launching its own wireless brand within 18 to 24 months, he added.

“The sale makes sense for Shaw since synergies with ViaWest were limited given the latter’s footprint is mainly in the U.S .,” Desjar dins analyst Ma her Yaghi wrote in a note. “We believe this transaction should allow Shaw to redeploy cash where it is needed: wireless.”

The spectrum’s price tag was slightly less than expected, RBC analyst Drew McReynolds noted to clients, but still reduces Quebecor’s net debt.

Shaw first entered the wireless game with the 2016 purchase of new entrant Wind Mobile, which it rebranded to Freedom Mobile.