Shaw says timing, current market dynamics made Wind deal attractive

The economics of entering Canada’s wireless market through the acquisition of Wind Mobile today are better than past opportunities Shaw Communications Inc. has had to enter the mobile sector, officials said during a conference call Thursday morning. “By acquiring a company that already has a solid foundation, including spectrum, management expertise and scale, we have significantly lowered our risk of entry, and have done so in a disciplined and prudent manner,” Brad Shaw, CEO of Shaw Communications, said during the call. His comments came hours after a late-Wednesday announcement that Shaw had struck a deal to buy Wind for $1.6 billion. Shaw discussed the company’s past flirtation with entering the mobile market, starting with its purchase of $190-million worth of spectrum in the 2008 AWS auction, only to decide three years later to abandon its wireless ambitions and instead build a network of WiFi hotspots for its Internet subscribers. “The fundamental economics and environment, including access to spectrum, roaming agreements, challenges with respect to tower sharing, evolving wireless technologies and overall market dynamics did not result in a compelling business case that would drive long-term value for our shareholders,” Shaw said. Barclays Capital analyst Phillip Huang asked during the conference call what changed in recent months, given that Shaw sold its spectrum to Rogers Communications Inc. in June for $350 million and sat out three different spectrum auctions this year. Shaw responded: “One of the things we looked at, which was very important to us, was to accelerate our opportunity in wireless and de-risk it, and we thought Wind was the best way forward in that regard.” Trevor English, Shaw’s senior vice-president of corporate development, said: “A lot’s changed within the wireless industry, the dynamics, the regulatory environment to make it a lot more compelling business case.” English also addressed the fact the one of the key spectrum auctions this year, for AWS-3, provided advantages only for smaller carriers who were already operating. Regulatory changes that have taken place include moves by the CRTC this year to establish domestic roaming tariffs for smaller Canadian mobile carriers to access the networks of larger companies. As well, two other startups to emerge from the 2008 spectrum auction have been swallowed up; Mobilicity is now part of Rogers, and Public Mobile was bought by Telus Corp. Jay Mehr, Shaw’s chief operating officer, said: “If you do the actual math, I don’t know that you can get (to having a mobile service) less expensive any other way. Had we entered the market in 2011, under the rules that existed, … under the spectrum that was available, with what it would have cost us to construct, with what the roaming regime looked like, without ability to access towers, there’s no way that math gets you to today better than today.” Desjardins Securities analyst Maher Yaghi prompted a few chuckles during the call when he said, “It’s never too late to do the right thing.” Brad Shaw called that deal “an important and transformative transaction for Shaw and all of our stakeholders. We are excited about Shaw’s future with mobility as a key asset to drive growth and exceptional customer experiences, and accordingly, we are pleased we could come to an agreement with the shareholders and management of Wind.” He discussed the opportunity of leveraging the company’s network of 70,000 WiFi hotspots, and its wireline network, to compliment the mobility offering of Wind. “This truly is an exciting transaction for Shaw as it enables us to develop a best-in-class converged wireline and wireless network,” Shaw said. “Mobility is increasingly important as consumers’ demand for ubiquitous connectivity grows. We believe that the combination of our significant fibre infrastructure, WiFi network and now wireless will offer an exceptional customer experience.” Company officials say the transaction will close within the first half of next year. It still needs approval from the Ministry of Innovation, Science and Economic Development, as well as the Competition Bureau. Competition Bureau spokesman Taylor Bildstein confirmed by email the agency is looking into the proposed acquisition. She added that it’s “difficult to say how long a particular review will take, as the bureau evaluates the steps that need to be taken on a case-by-case basis.” Innovation department spokeswoman Stéfanie Power said in an email that government does not comment on specific cases while under review. “Each spectrum licence transfer request is treated on a case-by-case basis and is confidential while under consideration,” she said. “Once a decision has been reached on an application, that decision will be made public on our website.” When Prime Minister Justin Trudeau was asked about the deal during a press conference in Vancouver Thursday, he referred to the review that will be conducted by the Competition Bureau "to ensure that it is in the interests of consumers, very broadly. Obviously Canadians are very aware of the costs of cellphone data and rising costs of a broad range of household bills, and we are working with Canadians to ensure that our revenues, our incomes, the growth in our communities are keeping pace with rising costs of living." — With reporting by Derek Abma at dabma@thewirereport.ca and editing by Shruti Shekar at sshekar@thewirereport.ca

Shaw says timing, current market dynamics made Wind deal attractive

Broadcast | December 17, 2015

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Shaw says timing, current market dynamics made Wind deal attractive

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