April 11, 2008 / 12:50 PM / in 9 years

Shaw profit lifted by tax gain, subscriber jump

TORONTO (Reuters) - Shaw Communications Inc SJRb.TO, Canada's No. 2 cable and satellite TV company, said on Friday that second-quarter net profit more than tripled, lifted by a C$188 million ($184 million) tax recovery, strong subscriber gains and higher prices.

Shaw also repeated that it plans to participate in the upcoming auction of Canadian wireless spectrum and will bid on licenses as it deems appropriate. It would fund any license purchase from free cash flow and an existing credit facility if needed, it said.

And in a conference call with analysts, Chief Executive Jim Shaw hinted the company was leaning toward rolling out a network if its bids at next month's auction are successful.

"Shaw will not deploy if the economic model does not work in the long term," he said. "And when we see the economic model on wireless, it looks to us like it works."

Shaw's stronger results helped lift the stock 5 percent to C$21.20 on the Toronto Stock Exchange and ahead 4 percent to $20.76 in New York. So far this year, the shares are down about 10 percent.

The company earned C$299 million, or 69 Canadian cents a share, in the three months ended February 29. That was up from a profit of C$80 million, or 18 Canadian cents a share, in the same period a year earlier.

Excluding non-operating items, profit rose to C$113 million from C$79 million.

Service operating income before amortization jumped 15 percent to C$350 million, above analysts' average forecast of C$344 million.

The Calgary-based company said revenue rose 11 percent to C$763 million, as cable revenue jumped 13 percent and satellite sales grew 6 percent. That bettered the average estimate of C$760.5 million in sales, according to Reuters Estimates.

Shaw also lifted its growth forecast for service operating income before amortization to a range between 13 percent and 15 percent from a previous 10 percent to 12 percent target.

It expects capital expenditures to exceed C$700 million on plans to speed the pace of some big projects and says it is on track to meet its free cash flow target of C$450 million.

"We believe this supports Shaw's strategy to invest to maintain its competitive position," UBS analyst Jeffrey Fan wrote in a note to clients. He rates the stock a "buy" and has a C$27 12-month target.

During the quarter, free cash flow increased to C$138 million, from C$100 million a year earlier.

"Quarterly subscriber gains in digital phone and digital were the strongest additions we have had, exceeding last quarter's record gains," Jim Shaw said in a statement.

"We also achieved several milestones, reaching 1,500,000 Internet customers in the quarter and, most recently, surpassing 500,000 digital phone lines."

The company added 6,524 basic cable subscribers, 48,006 digital customers, 31,517 Internet customers and 4,977 direct-to-home satellite subscribers.

Shaw, which lacks cell phone service to bundle with its home phone, cable TV and satellite offerings, added 56,536 digital phone lines in the quarter.

($1=$1.02 Canadian)

Reporting by Susan Taylor and Wojtek Dabrowski; Editing by Rob Wilson

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