Shaw Communications revenue rises, but so do costs

TORONTO (Reuters) - Canadian cable company Shaw Communications Inc SJRb.TO reported a 2.6 percent increase in revenue on Thursday but paid heavily to add wireless and internet subscribers, squeezing its margins.

FILE PHOTO: The Shaw Communications sign is seen on their office building in Calgary, Alberta May 3, 2010. REUTERS/Todd Korol

Shaw said its wireless business - which it acquired in early 2016 - added 29,089 net postpaid customers in the period and almost 12,000 more who prepay for service.

The company said it expects to notch a 5 percent increase in consolidated operating income before costs in 2018, mostly coming in the second half of next year.

RBC Capital Markets analyst Drew McReynolds said margin pressure and the forecast for delayed earnings growth would likely weigh on the stock, which was down around 0.7 percent in morning trade.

Calgary-based Shaw is locked in a fierce battle for internet, television and telephone customers in the west of the country with Vancouver-based rival Telus Corp T.TO.

Chief Executive Brad Shaw told analysts on a conference call that the company has reached a deal with Apple Inc AAPL.O to offer the iPhone for the first time.

The company is spending heavily to upgrade the wireless business and has launched a renewed television product based on Comcast's CMCSA.O X1 video platform it hopes will help it win back market share lost to Telus' Optik TV.

The product, known as BlueSky, helped Shaw capture and retain more subscribers for its television and internet products, which often get sold in bundles, although marketing costs weighed.

The company said its consumer unit added just over 22,000 internet subscribers in the period, and more than 7,500 cable subscribers. It lost more than 3,000 satellite TV consumers and 4,535 consumer landline telephone accounts.

Its operating margin fell, however, to 38.5 percent, from 42.4 percent a year earlier.

Net income rose to C$481 million, or 96 Canadian cents per share, in its fiscal fourth quarter, ended Aug. 31, from C$154 million, or 31 Canadian cents per share, a year earlier.

The latest quarter included a C$330 million gain on the sale of its data center subsidiary ViaWest. The company used some of the proceeds to buy wireless spectrum to improve data speeds in Toronto, Vancouver, Calgary, and Edmonton..

Revenue rose to C$1.24 billion from C$1.21 billion.

On an adjusted basis, the company said it earned 30 Canadian cents a share. Analysts had on average expected 28 Canadian cents a share on revenue of C$1.27 billion, according to Thomson Reuters I/B/E/S.

Reporting by Alastair Sharp in Toronto, additional reporting by Akshara P in Bengaluru; Editing by Anil D’Silva and Steve Orlofsky