By CHRISTINE DOBBY
Friday, January 12, 2018
Shaw Communications Inc. says adding the iPhone to its lineup changed "all aspects" of its wireless business and predicts that its Freedom Mobile unit will attract a record number of subscribers this quarter, despite a fierce promotional battle with the Big Three carriers.
The Calgary-based company has made a number of changes to its fledgling wireless business over the past several months. In mid-October, it launched low-price mobile data plans dubbed "Big Gig", which include 10 GB of data for $50 a month. Shaw has also been upgrading its network by repurposing certain airwaves to make its LTE (4G) service compatible with a wide range of older smartphones, making it more appealing to customers who want to use their own devices rather than get new ones.
But nothing has been as significant to Freedom as finally striking a deal with Apple Inc. to sell its iconic device directly to customers, Shaw president Jay Mehr said on a conference call Thursday following the company's release of its fiscal firstquarter results.
Shaw began selling iPhone X and iPhone 8 models across all of its markets (Ontario, British Columbia and Alberta) on Dec. 8 and also offered older iPhone models in B.C. and Alberta, where it had already made changes to allow them to work on its network.
"To be clear: I underestimated the importance of the iPhone to our business. It has changed all aspects of our wireless business," Mr. Mehr said, explaining Freedom has been adding customers at a fast pace, all of them at more than $50 a month in revenue, well above its current average revenue per user of $37.52.
Freedom is also selling more phones directly to customers, he said, rather than simply providing wireless service to subscribers who bring their own devices.
"I think you're going to see a net gain in Q2 that's meaningfully stronger than what you've seen from us at any time."
Shaw reported first-quarter financial results just below analyst expectations as momentum at Freedom helped offset weaker numbers at its cable division. Freedom added 34,310 new customers in the three months ended Nov. 30, just ahead of analyst estimates and up from just 9,000 this time last year. The quarter did not include the iPhone launch, which will be captured in the second-quarter figures later this year.
Freedom's moves prompted a response from Rogers Communications Inc., followed by Telus Corp. and then BCE Inc. (along with their respective discount brands), which offered steeply discounted promotions of $60 for 10 GB a month in areas where Freedom operates.
The deals were only in the market for a period of four or five days in December, sparking a shopping frenzy and overloading call centres.
Mr. Mehr said that "record disconnects" during that short period of time did put a dent in Freedom's customer additions and admitted that "unfortunately you can't replace the five key selling days before Christmas with five days in February."
But he added that Freedom was "primarily a spectator" to the "wireless dust-up."
"The Big Three were the primary participants in this. Our disconnects over those four or five days must have been a small, small, small fraction of the swap that those three guys did to each other."
In separate remarks delivered to the company's annual general meeting, CEO Brad Shaw said, "Media said we started a price war. We say we were paying attention to what Canadians wanted. And that's what true competition does."
Shaw said on Thursday that revenue at its wireless business grew by 27 per cent to $175million in the quarter but the company's wireline business - which includes residential and business television and internet service - was a drag on results.
Revenue at the wireline business declined by 0.4 per cent to $1.08-billion while Shaw's overall sales increased by only 2.7 per cent to $1.25-billion, just missing consensus analyst forecasts of $1.26-billion.
Profit increased by 28 per cent to $114-million in the period, with Shaw attributing the gain in part to a non-operating loss that was recorded in the comparable period last year.
The company reported earnings per share of 22 cents, up from 18 cents this time last year.
Operating income before restructuring and amortization costs declined by 4.6 per cent to $481-million, falling short of analyst estimates of $495-million. Shaw's stock was down sharply on Thursday, closing at $27.16 - a 78-cent drop.
Shaw reported first-quarter financial results just below analyst expectations, as momentum at the company's Freedom Mobile subsidiary helped offset weaker numbers at its cable division.
JEFF MCINTOSH/ THE CANADIAN PRESS