December 17, 2015 / 10:04 PM / in 3 years

UPDATE 1-Telus shares sunk by rival Shaw's move on Wind

(Adds Telus comment, details; updates share prices to close)

By Alastair Sharp

TORONTO, Dec 17 (Reuters) - Telus Corp fellstock fell to its lowest since early 2014 on Thursday, after competitor cable company Shaw Communications Inc surprised its main rival with an offer to buy wireless operator Wind Mobile on Wednesday.

Analysts cheered Shaw’s move, which would give Wind more financial heft to expand and improve its network and provide 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,” said Dave Heger, a telecommmunications sector analyst at Edward Jones.

Telus said it was confident in its ability to compete with Shaw in wireless, citing its lauded customer service among other differentiating factors.

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 would 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 though 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.

A consumated deal would close a seven-year chapter in which independent wireless operators were encouraged by the former Conservative government to challenge three national wireless players: Telus, Rogers Communications Inc and BCE Inc .

Existing regional operators Quebecor and Eastlink added wireless in that process too, while Shaw also bought spectrum before reversing course.

Of Wind’s fellow independents who first acquired spectrum in 2008, Rogers bought Mobilicity out of creditor protection in June and Telus acquired Public Mobile in 2013.

While all three sought customers by undercutting on price, Wind has since moved to attract higher-value customers while still playing up the simplicity of its unlimited call, text and data plans.

“We expect Wind under Shaw’s ownership to remain a disciplined fourth wireless player with a focus on balancing growth and profitability,” RBC analyst Drew McReynolds wrote in a note.

Telus ended the day down 6.7 percent at C$37.92 and Shaw lost 7.7 percent to C$24.90. Canada’s wireless leader Rogers shed 5.6 percent to C$47.45 and BCE Inc fell 2.4 percent to C$53.52.

$1 = 1.3928 Canadian dollars Reporting by Alastair Sharp, editing by Gary Crosse

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