Shaw promises more integration with Freedom under new COO

Shaw Communications Inc. said Wednesday that its Freedom Mobile division will have a new chief operating officer, as Paul McAleese takes over from Alek Krstajic. CEO Brad Shaw said in a call with analysts that McAleese would “guide Freedom’s operations in continued growth going forward, and will be instrumental regarding the integration of our wireless operations within Shaw.” Analyst reaction Wednesday was mixed. While Canaccord Genuity’s Aravinda Galappatthige said he viewed Krstajic’s leaving as negative, Barclays Capital analyst Phillip Huang said McAleese was the right choice to head Freedom. McAleese moves to Shaw from the United States mobile virtual network operator (MVNO) i-wireless LLC, which he co-founded and where he served as CEO, according to his LinkedIn profile. He was with the Cincinnati, Ohio, company, which is an MVNO for the U.S. grocery chain owned by Kroger Co., since July 2005. He was also general manager of consumer markets for Telefónica SA’s United Kingdom division, O2, between 1998 and 2003, following five years at Rogers Communications Inc. as vice-president of consumer marketing and sales at its wireless division. During his time at Rogers, he worked on “the development and launch of amigo, the first packaged product targeted to Canadian wireless consumers,” according to his profile. Huang wrote in a note Wednesday that while the CEO change was expected, "it came a bit earlier than we anticipated. At first glance, Mr. McAleese appears to be exactly who Shaw needs to grow Freedom Mobile.” However, Galappatthige said that while “we recognize that Mr Krstajic was not seen as the long-term incumbent to this role, we view his departure at this juncture as a negative. This is due to the fact that Freedom is right in the middle of its most critical phase with the rollout of LTE, securing handsets, building distribution and ramping up the internal operations to a point where it can accommodate a larger subscriber base successfully.” Krstajic was CEO of Wind Mobile when it was acquired by Shaw. Shaw rebranded Wind as Freedom Mobile late last year. At the time, Huang suggested that Shaw didn’t use its own name as part of the rebranding because of the gap in network quality compared to bigger wireless companies, which could dilute the brand for its cable business. During a conference call with analysts to discuss the company’s second-quarter results, Jay Mehr, Shaw’s chief operating officer, said that “Freedom is an affordability brand. And we’re committed to Canadians having affordable wireless, and that’s our spot and we’re going to stay in that spot and not be moved from that spot.” RBC Capital Markets analyst Drew McReynolds said in a note that he doesn’t expect any change to Shaw’s wireless strategy following the announcement. “Concurrent with this management transition, Freedom Mobile will now be more operationally integrated as a separate business unit within the rest of Shaw (including all corporate functions). We view the announcement and integration as in the ‘normal course’ post-acquisition,” he wrote. Desjardins Capital Markets analyst Maher Yaghi said in a note that Krstajic’s departure “adds to the operational risk that SJR is facing throughout its wireless deployment, but we are still supportive of this undertaking.” He added that Krstajic “was well-regarded in the industry and was an important part of Shaw’s wireless savviness.” National Bank Financial analyst Adam Shine noted that Krstajic “knows Mr. McAleese well, previously worked with him decades ago, and had a hand in having him join Freedom Mobile as its new leader.” He also wrote in a Wednesday note that 75 per cent of Freedom subscribers are in Ontario, meaning only a quarter are in Shaw’s operating territory. “Though a small shift has been happening at Freedom to pivot a bit more of its focus/efforts to Western Canada, nothing dramatic has yet to occur. As this does happen, Shaw will become better positioned to leverage its expanded product portfolio,” Shine said. In the second quarter, Shaw reported $1.3 billion in revenue, a 13-per-cent increase from the same quarter a year earlier. It said in its quarterly report the increase was primarily due to the acquisition of Freedom Mobile, citing the $140 million its wireless division brought in this quarter. Net income was $147 million, down 10.4 per cent from the $164 million a year earlier. The company lost 7,124 consumer cable subscribers in the quarter, reporting a total of 1.65 million at the end of three-month period ending Feb. 28. It also lost 4,611 satellite TV subscribers, ending the quarter with a total of 770,294. At the same time, the company gained 13,466 residential Internet subscribers in those three months, with 1.8 million at the end of the quarter. In wireless, Freedom added 33,582 postpaid subscribers, for a total of 714,917 at the end of quarter, compared to the 9,470 it added in Q1. It also lost 155 prepaid subscribers in the second quarter, for a total of 371,268. That 33,427 net increase in subscribers helped increase wireless revenue by 1.5 per cent compared to the previous quarter, to $140 million. However, average revenue per user was down from $36.84 in the previous quarter to $36.44. The company said in its quarterly report that the growth “demonstrates that Freedom Mobile’s value proposition is resonating with value-conscious Canadians.” Shaw also gave an update on its rollout of DOCSIS 3.1 technology, which it said in the quarterly result document was “targeted for completion as planned by the end of fiscal 2017.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Charelle Evelyn at cevelyn@thewirereport.ca

Shaw promises more integration with Freedom under new COO

News | April 12, 2017

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Shaw promises more integration with Freedom under new COO

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