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Apr 13, 2022

Shaw posts lower second-quarter profit and revenue, remains focused on Rogers deal

Rogers-Shaw deal wins conditional approval from CRTC, but deal needs other approvals

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Shaw Communications Inc. recorded a smaller profit in its latest quarter as revenue also edged down ahead of its planned multibillion-dollar takeover by one of Canada's largest telecoms.

The Calgary-based cable, internet and wireless company earned a net income of $196 million in its second quarter, down 9.7 per cent from $217 million in the same period a year ago. 

Shaw absorbed a drop of 58,100 subscribers in its wireline business, where declines in video, satellite and phone subscriptions more than offset a "modest gain" in consumer internet, the company said Wednesday. Year over year, wireline, which accounts for more than three-quarters of total revenue, dropped over one per cent to $1.04 billion, while adjusted earnings fell nearly six per cent to $509 million.

However, the wireless business saw adjusted earnings rise 27 per cent year over year to $123 million last quarter amid subscriber growth. The wireless segment operates in Ontario, Alberta and British Columbia, covering about half of Canada's population of 38 million.

Shaw's profit last quarter amounted to 39 cents per share compared with 43 cents per share in the same period of 2021.

Revenue for the three months ended Feb. 28 was $1.36 billion, down two per cent from $1.39 billion last year. 

Shaw executive chairman and CEO Brad Shaw says the company has achieved a critical milestone regarding its would-be acquisition by Rogers. The two telecoms still aim to close the deal in the first half of this year, he said in a release.

For the second quarter in a row, the company held no conference call to discuss financial results with analysts.

"It's not an atypical practice for a company that's either close to completing an M&A transaction or in the midst of an M&A transaction to avoid or not hold a typical conference call with its shareholders," said J.R. Laffin, co-head of capital markets and public mergers and acquisitions at law firm Strikeman Elliott.

He noted that analyst calls are not required by law.

"All the information is generally out there in the filings in any event," he added, though steering clear of calls may also mark "a level of caution that both parties generally like to exercise."

Last month, the Canadian Radio-television and Telecommunications Commission approved Rogers' purchase of Shaw's broadcasting services, and laid out a series of conditions Shaw must meet.

The approval from the broadcasting regulator marked one of several hurdles Rogers must clear as it tries to close the $26-billion deal it signed in March 2021 that would see it acquire 16 cable services based in Western Canada, a national satellite television service and other broadcast and television services.

The Competition Bureau and Innovation, Science and Economic Development Canada are also reviewing the deal.

Early last month a parliamentary committee said the Rogers bid should not proceed but that if it does, the government should make its conditions attached to the approval "fully enforceable."

In a report on the proposed merger tabled March 4, the House of Commons industry and technology committee recommended that the affordability and accessibility interests of Canadians should take precedence over all other considerations during the regulatory review process.

The non-binding report says the government should stress the importance of Freedom Mobile, Shaw's wireless carrier, as a fourth wireless provider that competes with the Big Three of Rogers, Bell and Telus.

RBC Capital Markets analyst Drew McReynolds says Rogers will likely be required to divest some or all of Shaw’s wireless assets, rejigging the competitive landscape.

"Having said this, we believe under most remedy scenarios such a reshuffling should still be manageable for the national wireless operators, reflecting 5G leadership and a continued ability to compete against a new fourth wireless operator in Ontario, Alberta and B.C. via increased wireless-wireline bundling, improved base management and/or greater tactical use of flanker/discount brands," McReynolds said in a Sunday release.