Leading Canadian telecom operator Shaw Communications Inc. SJR has now decided to venture into the Canadian wireless market. Yesterday, the company announced that it has agreed to acquire a 100% interest in Mid-Bowline Group Corp., the parent company of the WIND Mobile Corp., for an enterprise value of approximately C$1.6 billion (around $1.16 billion).
Wind Mobile is the fourth largest wireless operator in Canada with around 940,000 subscribers across Ontario, British Columbia and Alberta. In each of these markets the company holds 50MHz of spectrums. In 2015, Wind Mobile is expected to generate revenues of C$485 million and an EBITDA of C$65 million. The deal is expected to close during Shaw Communications’ third quarter of fiscal 2016 (slated to end on Aug 31, 2016) subject to customary regulatory approval.
This is not the first of Shaw Communications’ endeavors to step into the wireless market. In 2008, the company acquired 18 licenses of AWS-1 band. However, it ultimately decided to abandon its plan to install wireless networks in 2011. Finally in 2014, Shaw Communications sold these spectrums to its competitor Rogers Communications Inc. RCI for C$350 million.
The Canadian wireless market is predominantly controlled by three big players. Apart from Rogers Communications, Telus Corp. TU and BCE Inc. BCE are other two incumbents. Together, these three firms control around 90% of the total market. Despite the fact that Wind Mobile is the fourth largest wireless operator, its current scale of operation is considerably behind the three wireless giants. In 2013, Telus bought small-sized wireless operator Public Mobile and Rogers Communications acquired Mobilicity this summer.
At present, Shaw Communications offers wireline telephony, high-speed Internet and video services to residential and business enterprises through its fiber optic, WiFi and cable TV services. The company currently serves around 3.2 million customers and has installed about 75,000 WiFi hotspots. Last week, Wind Mobile closed a debt facility of C$425 million in order to upgrade its networks from 3G to 4G LTE by 2017.
The acquisition of Wind Mobile will provide Shaw Communications the necessary economies of scale, crucial spectrums, a strong retail distribution chain and an installed base of wireless networks. With Wind Mobile in its kitty, we believe, Shaw Communications will be in a position to offer quad-play wireline telephony, high-speed Internet, video and wireless services on par with the other large three telecom operators in Canada.
Shaw Communications currently carries a Zacks Rank #5 (Strong Sell).
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