Wind hits 1M subscribers in first quarterly report since 2014

On Friday, Shaw Communications Inc. released Wind Mobile’s first quarterly results since it acquired the wireless company earlier this year, which showed revenues of $132 million for the quarter, as the company assured analysts and shareholders on a conference call that its wireless strategy will take off as it launches an LTE network and obtains low-band spectrum in the future. Wind’s revenues were up 24 per cent compared to the equivalent period last year, driven by a 136,000 increase in subscribers year-over-year, the company said. Its average revenue per user (ARPU) was $36.30 for the three months ending May 31, compared to $35.81 for the third calendar quarter in 2015. It didn’t report profits for the quarter. Shaw also said Wind reached its one-millionth combined postpaid and prepaid subscriber. While the company released year-old financial figures for Wind when it bought the wireless carrier, the last time up-to-date quarterly figures were available was in 2014, when Wind was owned by VimpelCom Ltd. “Given the market conditions with where the flankers have been with a slightly better product, I think the ARPU growth we’ve experienced is what we’ve expected,” Alek Krstajic, executive vice president and president of Wind, said on a conference call with analysts Friday morning. “We have not been focused on trying to drop price and accelerate sales beyond a natural rate of growth that’s in the market right now. We want to get our house in order, in terms of network, before we push hard on the accelerator.” That includes sticking to its strategy of first completing its LTE project by the end of fiscal 2017 and then, to position itself properly against incumbents, obtaining and adding low-band spectrum. Krstajic didn’t specify whether he was referring to potentially acquiring the 700 MHz spectrum currently owned by Quebecor Inc.’s Videotron, or the upcoming 600 MHz spectrum auction. He added that the company has 30Mhz of AWS-3 spectrum to play with, “a big chunk” to “be all turned on with LTE.” “When you take into account that we’re still operating with a 3G product, with a network that still needs some upgrading, I think the growth that we are seeing is actually part of our walk before we run strategy,” Krstajic said. “Once LTE launches next year, we have an opportunity to grab a better percentage of those gross ads and a lot of things have been fixed. You’ll continue to see our churn rates drop, and you actually start to see growth that is more commensurate with what this opportunity represents. “I’m not uncomfortable at all with the number of cell sites we have for the area we’re trying to cover,” Krstajic added. “I think the priority is not lost us and it’s sure as heck not lost on the folks in Ottawa — part of having a sustainable fourth player option is making sure that the offering from the fourth player comes as close to being the same as what these three incumbents have, and it’s pretty hard to do that…without low band spectrum.” Shaw closed its acquisition of Wind on March 1. The wireless company has switched hands a few times over the years, with VimpelCom selling its stake to a consortium of investors led by Anthony Lacavera in 2014, which then sold to Shaw for $1.6 billion. Shaw said that while it did not suffer any service damage or disruptions in the fire-ravaged Fort McMurray, Alta. region, the damage caused a 5,400 reduction in customers for the quarter. It also said the one-month credit for customers in the region was partly to blame for the hit it took in the quarter. Still, Canaccord Genuity analyst Aravinda Galappatthige said in a research note that the wireless segment’s earning before interest, taxes, depreciation and amortization (EBITDA), at $29 million, long beat his $18-million expectations, while also beating RBC’s Drew McReynolds’ margin expectation of 15 per cent by seven, according to McReynold's note. “While we are pleased with the wireless EBITDA result in Q3, the game we’re not playing is one that optimizes EBITDA in the short and medium term. This is a growth asset and we’re focused on growth,” Brad Shaw, Shaw’s chief executive officer, said on the call. Galappatthige added in a note Monday that there is still “little margin for error with respect to sustaining the current dividend,” considering that spend for lower band spectrum is still on the agenda. Barclay Capital’s Phillip Huang said in a note Friday that “we believe results reflect management’s disciplined approach towards market share gain thus far, and that Wind has not been disruptive to the market.” Huang added in another follow-up note Friday that he sees positive long-term growth potential, but believes that for Wind to be a disrupter, Shaw will have to invest some $1 billion over several years “to acquire low-band spectrum (i.e. 600MHz and 700MHz), increase cell site density, expand distribution, extend handset offering (e.g. iPhones) and improve brand/marketing before Wind is able to gain traction with higher-ARPU customers." In an analyst note late Friday, McReynolds said Shaw entering the wireless space and selling Shaw Media to Corus Entertainment Inc. provided a big boost to revenue and EBITDA growth. Additional revenue will come from a “higher volume of higher-priced handsets,” he added. However, he said investors would have a better idea of where Shaw is when the company completes major goals, including spectrum spending, dividend growth after spending on LTE and “easing Alberta” and competitive pressure. On Friday, Shaw also announced the launch of its new Internet package, WideOpen Internet 150, which it called its “affordable and unrivalled product that showcases the strength and reach of our hybrid fibre coax network.” Shaw said it is providing the product at an introductory price of $49.90 per month for the first 12 months on a “two-year price-guaranteed value plan,” a move that prompted TD Securities’ Vince Valentini on the call to question whether this was a direct challenge to Telus Corp. in Western Canada. For the quarter, Shaw reported overall revenues of $1.28 billion, or a 13 per cent increase over the equivalent quarter in 2015. Net income for the quarter was $704 million, an increase of 236 per cent from $209 million for the third quarter last year. The company reported 1,777,301 Internet subscribers in the quarter, as compared to 1,772,293 for August 2015. It had 1,693,230 TV subscribers in the quarter, as compared to 1,764,523 for August 2015. — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Wind hits 1M subscribers in first quarterly report since 2014

News | July 15, 2016

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Wind hits 1M subscribers in first quarterly report since 2014

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