In a significant move yesterday, the Canadian Cable MSO Shaw Communications Inc. (SJR) decided to put aside its plan to enter into the wireless market of that country. Instead, the company will now build a cheaper Wi-Fi network, which will enable offloading 3G/4G wireless data traffic across a short distance from landline Internet access points, such as homes, offices, snacks bars etc. Wi-Fi network will enable Shaw’s customers to connect smartphones, tablets, and other mobile devices to Internet in a cost effective manner.
We believe the decision of Shaw to abandon its wireless venture will significantly reduce the company’s competitive strength in a highly lucrative Canadian telecom market. Shaw offers tripe-play cable TV and satellite TV, Internet, and wireline phone services, whereas its main competitor Telus Corp. (TU) offers Cable TV, Internet, wireline, and wireless services. Telus shares a national wireless network with Bell Canada, a division of BCE Inc. (BCE). Its popular Optik TV, which offers IPTV services, is quickly eroding Shaw’s market share. In addition, Shaw will now lack a major competitive weapon, which is the wireless service.
What is demoralizing for Shaw is that the company is one of the key winners of wireless spectrum auction in Canada as early as in 2008. However, the company never sets its strategies right to enter into this lucrative venture. As of now, the company spends approximately $410 million for wireless business including spectrum charges. However, it just continues to delay from late 2011 to early 2012 and now finally quit this market. The company has decided to sell its existing wireless spectrum.
In the meantime, the Canadian wireless market becomes highly competitive. Bell Canada, Telus Corp, and Rogers Communications Inc. (RCI) account for 90% of this market. In a bid to improve service and prices through competition, the Canadian federal government has licensed four new operators beside the three existing giants. Media giant Quebecor is already offering low-cost wireless services in addition to its cable TV, Internet, and wireline services. New entrant Globalive also intends to offer wireless services in Canada.
We believe excluding wireless, Shaw Communications needs to execute its video offerings immediately, failing which the company may face server existing threat. In the previous two quarters, the company lost 27,239 cable TV customers, indicating that all is not well in this front.
BCE INC (BCE): Free Stock Analysis Report
ROGERS COMM CLB (RCI): Free Stock Analysis Report
SHAW COMMS-CL B (SJR): Free Stock Analysis Report
TELUS CORP (TU): Free Stock Analysis Report
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