Telus shares sunk by rival Shaw's move on Wind

Thu Dec 17, 2015 2:14pm EST
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By Alastair Sharp

TORONTO Dec 17 (Reuters) - Cable company Shaw Communications Inc gutpunched its main telecom rival with a surprise offer to buy wireless operator Wind Mobile, sinking shares in Telus Corp on Thursday amid competition fears.

Telus fell to its lowest since early 2014 as analysts cheered Shaw's move, which if completed, would give Wind more financial heft to expand its network and provides Shaw with an established wireless product to bundle with its Internet, television and landline services.

"For Shaw, what was attractive was not having to go through the initial stages of building a greenfield network and going through the pain points of getting that up and running," Dave Heger, a telecom analyst at Edward Jones, said in a telephone interview.

Shaw calculated in 2011 that building a wireless network in Alberta and British Columbia would cost it at least C$2 billion.

It said on Wednesday it had agreed to pay C$1.6 billion for Wind, which serves almost 940,000 customers in major cities in Alberta, British Columbia and Ontario. Three-quarters of its customers are in Eastern Canada.

Shaw stock also fell, however, as investors calculated the company would take an initial hit by acquiring loss-making Wind and could dilute the value of existing shares by using an equity offering to finance the deal.

The deal, if closed, ends a seven-year experiment created by the former Conservative federal government to stoke wireless competition by making some airwaves only available to new entrants and blocking their takeover by the three national wireless players: Telus, Rogers Communications Inc and BCE Inc.

Wind was the last man standing among independent operators who first acquired spectrum in 2008, with Mobilicity bought by Rogers in June and Public Mobile acquired by Telus in 2013.   Continued...