April 13, 2011 / 12:51 PM / 7 years ago

UPDATE 4-Shaw profit up on cost cuts; wireless build slows

* EPS C$0.37 vs C$0.32 yr ago, analyst forecast C$0.37

* Revenue up 29 pct at C$1.2 bln, in line with estimates

* First full quarter with Canwest assets in media unit

* Cuts jobs, says slowing wireless build to assess options

* Shares fall 3.4 percent on TSX to lowest since July 2010 (Adds conference call, analyst quote, updates share price)

By Alastair Sharp

TORONTO, April 13 (Reuters) - Shaw Communications SJRb.TO, the dominant cable company in Western Canada, said its quarterly net profit rose 20 percent as it cut costs while pausing to reassess its planned entry into the booming wireless telecoms market.

Shares in the Calgary-based company lost more than 3 percent to a nine-month low as investors reacted to the further wireless delay and a perceived weakness in keeping subscribers as it eases off promotions.

That was the sharpest drop since Oct. 22, when Shaw’s fourth quarter missed expectations and it warned on 2011 growth. [ID:nN21104780]

Shaw, which bought wireless spectrum in 2008 but has lagged others in entering the market, said earnings for the quarter ended Feb. 28 were C$167.3 million ($174.3 million), or 37 Canadian cents a share, on revenue of C$1.2 billion.

Both were in line with analyst estimates.

“Our industry is transforming and competition in our core business continues,” Chief Executive Brad Shaw said in the earnings statement. “In this changing landscape, managing costs and operating efficiently are essential.”

Shaw said it cut 550 jobs in the quarter, including 150 managers, in a restructuring that cost between C$25 million and C$30 million but should save more than C$50 million a year.

TOUGH FIGHT OUT WEST

The Western Canada-focused company is fighting telecom rival Telus’s T.TO Internet-protocol television (IPTV) service for the attention of Shaw’s cable customers.

As the company realigns, it has struggled to keep existing customers and is attracting new ones more slowly than before.

Shaw lost 13,662 basic cable subscribers in the quarter, leaving it with 2.31 million, while digital customers rose by 35,403 to 1.75 million. Internet customers rose by 10,772 to 1.85 million and digital phone lines were up by 32,512 to 1.18 million.

Those figures disappointed analysts who had expected the company to lose between 1,000 and 10,000 basic cable customers and to add an average of 68,000 more lucrative digital cable users. The company was expected to add some 18,000 Internet accounts and 37,000 telephone lines.

“Cable financials and subscribers were both below expectations, which we believe reflects that Telus is continuing to win share by leveraging their IPTV in the bundle,” UBS analyst Greg White wrote in a note to clients.

Bundling refers to discounts offered to customers who sign on to more than one of a company’s wireless, Internet, cable or satellite, and telephone services.

Shaw said it would slow the building of its wireless network -- the fourth leg of any bundling offer -- as it considers its technology and strategy options. In January it pushed its launch into 2012. [ID:nSGE70CBAP]

Meantime, Telus and other established telecom firms plan upgrades to long term evolution (LTE) networks that are increasingly popular globally as companies struggle to handle customer appetite for mobile data.

ALL OPTIONS CONSIDERED

Asked by analysts whether Shaw would consider teaming up or making a purchase to aid in the wireless project, executives said all options were being considered.

“They have a lot on their plate,” said Troy Crandall, an analyst at retail brokerage MacDougall, MacDougall & MacTier who covers Telus but not Shaw. “I‘m not sure if Shaw’s ready for another acquisition.”

Shaw paid C$2 billion, including debt, to buy television assets from bankrupt Canwest in a deal that closed in October.

Shaw said its revenue growth had been moderated by the competitive landscape and that the risk has increased that it might miss its financial forecasts for the fiscal year. It said that cost-cutting will still allow it to record free cash flow of C$600 million for the year.

In the second quarter, revenue rose 29 percent to C$1.2 billion from C$929.1 million a year earlier, bolstered by its newly created Shaw Media division, which incorporated the Canwest broadcast assets it bought last year.

In the second quarter last year, Shaw reported profit of C$138.7 million, or 32 Canadian cents a share.

Its shares closed Wednesday at C$19.80, a drop of 3.4 percent.

$1=$0.96 Canadian Reporting by Alastair Sharp; editing by Rob Wilson

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