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Shaw Communications (SJR) Tops Q2 EPS by 8c

April 9, 2019 8:10 AM

Shaw Communications (NYSE: SJR) reported Q2 EPS of $0.30, $0.08 better than the analyst estimate of $0.22.

Wireless results include postpaid net subscriber additions of approximately 65,000, bringing the total Freedom Mobile customer base to over 1.5 million as of the end of February. As part of its network expansion plans in fiscal 2019, the Company launched wireless services in several new markets including Victoria and Red Deer on February 8 and an additional six communities in Eastern Ontario in early March. Freedom Mobile will continue to launch in new markets throughout fiscal 2019, primarily in Western Canada. Continuous network enhancements, including the deployment of 700 MHz spectrum, remain a priority as network quality contributes to the significant postpaid churn reduction, which improved approximately 30 basis points year-over-year to 1.36% in the quarter. Subsequent to the quarter end, the Company finalized an agreement with its third national retail partner, Mobilinq, and expects to launch prepaid services throughout the 50 additional locations beginning in April.

“Our Wireless subscriber and financial performance in fiscal 2019 reflects the execution of our strategic priorities. We continued to attract high quality subscriber growth in the second quarter against the backdrop of a less active market compared to a year ago, when we saw record subscriber performance for the Company as the iPhone became available for Freedom Mobile customers and we launched our Big Gig data plans. We delivered ABPU growth, up 7.5% in the quarter compared to a year ago, as more Canadians purchase our value-based offerings that focus on bigger data buckets. At the same time that we are growing our subscriber base, we are also improving the profitability of our Wireless business, with operating income before restructuring and amortization improving to $52 million this quarter. Our network investments are clearly paying off and, while our focus remains on growing our postpaid subscriber base, we have recently introduced refreshed prepaid plans to participate more effectively in this competitive segment of the market,” Mr. Shaw said.

Second quarter Wireline performance reflects improved Consumer Internet subscriber growth of approximately 11,100 RGUs, offset by continued Video RGU losses, resulting in stable year-over-year Consumer revenue while the Business segment delivered consistent top-line growth with revenue increasing 5.7% in the quarter. Combined with reduced operating expenses, primarily due to the voluntary departure program (“VDP”), Wireline margin of approximately 46% improved 280 basis points over the second quarter fiscal 2018, as the Company continues to focus on profitable and stable growth.

The Company has announced several significant Wireline enhancements related to its broadband service. In late November, Shaw doubled Internet speeds of its top residential tiers, and more recently, introduced a new brand platform to support the launch of additional broadband services – Shaw BlueCurve - which launched on April 4.

Shaw BlueCurve is a simple and powerful new technology that gives customers more coverage and greater control over their home Wi-Fi experience while helping redefine their relationship with in-home connected devices. The BlueCurve Home app is the latest innovative in-home consumer product that Shaw has brought to market through its partnership with Comcast, and is available with Shaw’s BlueCurve Gateway modem – the hub of customers’ in-home content and connectivity experience. Shaw BlueCurve Pods expand in-home coverage by creating a mesh Wi-Fi network that reduces the challenges of Wi-Fi dead spots. Shaw BlueCurve Pods are easily self-installed, plug directly into indoor electrical outlets, and can be easily moved to meet customers’ distinct coverage needs.

Mr. Shaw continued, “We are capitalizing on the network investments that we have made, and continue to make, in pursuit of providing customers with a superior connectivity experience. The broadband technology that we offer completely changes the conversation with our customers from just speed - to speed, coverage and control. Through this enhanced customer experience, we can more effectively differentiate ourselves from the competition, while building upon our journey to a modern Shaw.”

Outlook

The Company confirms that it remains on track to meet its fiscal 2019 guidance, which includes consolidated operating income before restructuring costs and amortization growing 4% to 6% over fiscal 2018; capital investments of approximately $1.2 billion; and free cash flow in excess of $500 million. The expected growth rate of 4% to 6% in consolidated operating income before restructuring costs and amortization is based on adjusted fiscal 2018 results that include the impact of IFRS 15. The Company’s guidanceincludes assumptions related to cost savings that will be achieved through TBT initiatives (specifically the VDP savings) that are expected to amount to a combined $140 million in fiscal 2019 (approximately $85 million attributed to operating expenses and approximately $55 million attributed to capital expenditures).

For earnings history and earnings-related data on Shaw Communications (SJR) click here.

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