April 12, 2013 / 12:53 PM / 6 years ago

Canada's Shaw loses customers, ekes out profit on price hikes

TORONTO (Reuters) - Shaw Communications Inc (SJRb.TO) (SJR.N) posted a 2 percent rise in second-quarter profit on Friday and said it expects modest revenue growth for the rest of the year, as price increases staved off an overall decline in its customer base.

Shares in Shaw, the dominant cable company in Western Canada, fell 1 percent in early trade.

Shaw lost almost 30,000 cable subscribers in the quarter, a sharp escalation of a secular trend, and added just over 13,000 landline telephone accounts. It added 7,800 net new Internet customers.

“Subscriber trends were very worrying,” Canaccord Genuity analyst Dvai Ghose wrote in a note, adding the sharp fall reflects “our concern that Shaw loses significant subscriber share when it pursues conservative pricing due to an inferior cable interface, an aggressive competitor and service issues at Shaw.”

The company is facing fierce competition from phone company Telus Corp (T.TO), which is pushing out an Internet-based television product to win over Shaw’s customers.

Shaw said a shortened National Hockey League schedule and fewer pay-per-view events hurt its ability to attract customers. But scaling back on promotional activity and raising prices for its services helped offset that weakness.

Shaw said net income rose to C$182 million, or 38 Canadian cents per share, from C$178 million, or 38 Canadian cents per share, a year earlier. [ID:nCCNnSw0ta] The earnings were in line with analyst expectations, according to Thomson Reuters I/B/E/S.

Revenue at the Calgary-based company rose 2 percent to C$1.25 billion. The company also said it expects consolidated free cash flow of about C$550 million in 2013.

Shaw has drawn the attention of Canada’s federal government for its plan to sell wireless spectrum it bought as a new entrant to mobile telephony in a 2008 auction to Rogers Communications Inc (RCIb.TO), a dominant national wireless provider.

Ottawa is eager to support greater competition in the sector and could yet veto the sale, which also includes an Ontario cable unit and would otherwise bring in some C$700 million for Shaw.

Not having a wireless service to offer in bundled packages for its TV, Internet and landline telephone customers is a disadvantage in Shaw’s battle out west with Telus.

It is not clear whether Shaw intends to bid in another round of spectrum auctions due to start later this year, after abandoning its earlier wireless plans.

It said earlier this week it planned to buy a fiber optic network from city-owned power company Enmax Corp for around C$225 million to boost its corporate offering.

Shares in the company, controlled by the Shaw family, fell 1 percent to C$24.41 in early trade on Friday, following a similar fall on Thursday. They have gained roughly 25 percent since mid-2012.

With additional reporting by Shounak Dasgupta in Bangalore; Editing by Nick Zieminski

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