* Q4 EPS C$0.28, versus analyst forecast C$0.34
* Competition, content costs cut profit
* Keeps monthly dividend constant until February
* Bradley Shaw to replace older brother Jim as CEO
* Shares drop more than 5 percent (Recasts with details from conference call, analyst quotes)
By Alastair Sharp
TORONTO, Oct 22 (Reuters) - Sharper competition and rising content costs hurt Shaw Communications’ (SJRb.TO) quarterly results and will likely limit 2011 growth, the Canadian cable company said on Friday, causing its share price to tumble.
The Calgary-based company, whose main focus is in Western Canada, is increasingly bumping up against Vancouver-based telecom company Telus Corp (T.TO), as Shaw prepares to launch its wireless network and Telus pushes into Internet-based television.
“Things are definitely getting a lot tougher,” said Dvai Ghose, an analyst from Canaccord Genuity. “They can’t really control the level of promotional activity in the market and they have cut prices in order to keep customers, with negative implications for revenues and cash flow.”
Shaw said it expects free cash flow of C$550 million in 2011 and will spend C$200 million of that on its wireless project, due to launch late next year, after spending about C$90 million in the quarter.
Shaw, which describes itself as a dividend growth company, kept its monthly dividend steady at 7.3 Canadian cents for December, January and February, and analysts questioned whether it would be able to raise payouts further into 2011.
“You’re going to go through a period of suppressed growth in the near-term while they make this big wireless investment,” said Greg Macdonald from National Bank Financial.
Shaw said promotions in the quarter were exceptional, but also said it expects growth in its core cable and satellite units to slow next year due to increased competition and higher programming costs.
Shares in the company were down more than 5 percent at C$22.24 on the Toronto Stock Exchange on Friday afternoon.
Shaw has bolstered its media offerings with its C$2 billion purchase of distressed television assets from Canwest Global CGS.V, a deal that Canada’s communications regulator is expected to approve later on Friday.
Analysts said the wording of executive guidance suggested organic 2011 EBITDA growth could dip to as low as 5.5 percent from previous guidance of 7.5 percent growth. The company declined to assess margins at Canwest.
Shaw earned C$122 million ($119 million), or 28 Canadian cents a share, in the three months to the end of August, down from C$124 million, or 29 Canadian cents a share, in the year-before quarter. Its consolidated service revenue rose 8 percent to C$939 million.
Analysts had on average expected revenue of C$957 million and net income of C$150 million, or 34 Canadian cents a share, according to Thomson Reuters I/B/E/S.
Shaw added 2,559 basic cable-TV subscribers in the quarter, bringing its total base to 2.3 million. Digital customers now account for more than 70 percent of that base.
Internet customers increased by 21,374 to 1.8 million and digital telephone lines rose by 51,896 to 1.1 million.
The company also announced what it called an “orderly transition” with Bradley Shaw replacing his older brother Jim as chief executive, effective Jan. 13. Their father, JR Shaw, remains executive chairman.
“Our core business continues to be resilient in the face of heightened competition,” incoming chief Bradley Shaw told analysts on a conference call.
Jim Shaw took over from his father as chief executive in 1998 and oversaw the 1999 spinoff of the company’s broadcast assets into Corus Entertainment (CJRb.TO), its purchase of wireless spectrum in 2008 and the Canwest deal.
$1=$1.02 Canadian Reporting by Alastair Sharp; editing by Peter Galloway