September 1, 2011 / 12:42 PM / 6 years ago

UPDATE 2-Shaw abandons wireless plan, embraces Wi-Fi

* Cites cost, competition for move away from wireless

* Shaw may now look to sell the spectrum

* Could be preparation to sell company - analyst

* Shares fall 2 percent to C$21.92 (Recasts, adds conference call, analyst quotes, background)

By Alastair Sharp

TORONTO, Sept 1 (Reuters) - Shaw Communications (SJRb.TO) has dropped its plans for a wireless telephone network and will instead build a cheaper Wi-Fi service, the Canadian cable company said on Thursday.

The decision means Shaw cannot challenge Telus Corp (T.TO), its main rival in Western Canada, on one of the four main services it offers.

“Shaw has absolutely no ability to retaliate in wireless while Telus is attacking them in wireline,” said Canaccord Genuity analyst Dvai Ghose, adding Shaw was in “a very unenviable strategic position”.

Shares of Calgary, Alberta-based Shaw, which offers cable and satellite television, as well as Internet and home phone services, were down 2 percent at C$21.92 by midday Thursday. Vancouver-based Telus was down 0.15 percent at C$53.90.

Telus’s relatively new Internet-protocol television product, Optik TV, is challenging Shaw’s cable-TV dominance of living rooms in the west, while Telus also shares a national wireless network with eastern-focused Bell Canada, a part of BCE (BCE.TO).

Bell, Telus and Rogers Communications (RCIb.TO), the country’s three biggest wireless providers, offer discounts to customers that also sign up for Internet, home phone and television products.

Shaw paid almost C$200 million ($205 million) for wireless spectrum set aside for new entrants in a 2008 government auction. But it dragged its feet as smaller startup companies rushed in to offer low-cost services, while Quebec-focused media heavyweight Quebecor (QBRa.TO) added wireless to its TV, Internet and landline offerings.

Shaw paid C$22 million in the last quarter to build the wireless network. [ID:nN1E75R135] BMO Capital Markets analyst Tim Casey estimates Shaw has spend around C$400 million, including the spectrum costs, on its mobility strategy in recent years.

He said a similar strategy employed by Cablevision CVC.N in the United States had elicited less than 20 percent uptake from that company’s core broadband customers.

“This is basically a manifestation of the fact that (Shaw) found wireless was too expensive, unlike Quebecor, which I think is the wrong decision,” Canaccord’s Ghose said.

Shaw executives said they may now look to sell the spectrum.

Chief Executive Brad Shaw told analysts on a conference call that, after a strategic review, the company decided “the return on required investment to enter the wireless business was not attractive” and would be of “marginal incremental value for our stakeholders.”

Desjardins analyst Maher Yaghi said Shaw’s move could be seen as preparation to sell the company, possibly to larger cable and telecoms company Rogers, or that Shaw may be hoping a new wireless entrant such as Wind Mobile or Mobilicity collapses and can be bought cheaply.

Meantime, Shaw hopes to tap into high demand for Wi-Fi, a lower-cost technology for moving data wirelessly across a short distance from a landline Internet access point.

It is commonly found in homes, offices and other places like coffee shops, to connect smartphones, tablet computers and other devices to an Internet connection.

$1=$0.97 Canadian Reporting by Alastair Sharp, additional reporting by Abhiram Nandakumar in Bangalore; editing by Rob Wilson

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