Shaw Communications Inc. and Telus Corp are fighting an epic battle over Canadian media consumers. Shaw’s quarterly earnings report released today show that its total earnings rose over three per cent today while its operating margin went down 2.2 percent.
This means Shaw will take a $100 million hit to its cash flow, from C$550 million to $450 million due to competition from Telus and “softness” in the advertising market. Shaw has also had to weaken its business arsenal against Telus by canceling plans for a cellular network.
Telus has been luring new consumers to its Internet, satellite, and television services through promotions, discounts, and a rival TV service called Optik TV. Due to significant losses in cable subscribers, Shaw is cutting its cable losses and focusing on its satellite and Internet services. Shaw is establishing an extensive Wi-Fi network that will enable Shaw Internet services to be accessible outside of the home—at public spots like coffee shops and malls.
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“This approach to the competitive environment, including costs associated with staffing, marketing expenditures, and the impact of our subscriber activity over the last quarter, has caused financial results to come under pressure," CEO Brad Shaw said on a conference call with analysts.
"We view the majority of these expenditures as core investments that provide long-term benefits for our company. We are focused on customer profitability and sustainable growth initiatives and we are not satisfied with this quarter's financial performance.”
However, Shaw’s results actually outperformed Wall Street expectations, according to Desjardins Securities analyst Maher Yaghi in a note to clients. While Yaghi applauded Shaw for its wise management, he also advised investors to wait for “better trends to emerge in the marketplace.”