The Calgary-based cable company said Friday it plans to invest $100 million this year on the new venture.
When Shaw’s wireless service makes its debut, mobile phone technology will have improved greatly from where it is today, and the company will be able to offer the most leading-edge products, said Michael D’Avella, senior vice-president of planning.
“Waiting was actually not a bad thing. It was the right thing to do,” he told a conference call with analysts, who have long been clamouring for more details about Shaw’s wireless plans.
Shaw spent $190 million on wireless licences nearly two years ago, when Ottawa allowed new entrants into an industry dominated by Rogers Communications Inc. BCE Inc.’s Bell Canada and Telus Corp.
Since that time, Globalive’s Wind has launched a new service and other networks from Public Mobile, Mobilicity and Quebecor Inc.’s (TSX:QBR.B) Videotron are expected to launch in the coming months.
Chief executive Jim Shaw said he doesn’t see the other newcomers as threats, since Shaw has established a solid rapport with its cable television, Internet and digital phone customers.
“How can that not be more successful than offering one product?” Shaw said.
Company president Peter Bissonnette chimed in with a jab at upstart Wind, whose customers have been complaining of poor network coverage in Toronto and Calgary.
“Wind on its own, with no existing customer relationships, is just a passing wind,” Bissonnette said to chuckles.
“They launched, frankly, very quickly and they lost a lot of credibility coming out of the gate because they had no coverage.”
In order to avoid revealing too much to the competition, Shaw did not provide details on what the overall cost will be for the wireless business, or which markets it plans focus on first.
Genuity Capital Markets analyst Dvai Ghose said he doesn’t understand why it has taken Shaw so long to join the game.
“They certainly lost early-mover advantage by definition,” Ghose said.
Ghose was also puzzled by Shaw’s decision in January to bump up its dividend by five per cent, when its nascent wireless business will be gobbling up cash-flow for the next few years.
“In the thirst to try and increase dividends and return cash to shareholders, they basically ignored wireless,” Ghose said.
Earlier Friday, Shaw reported net earnings of $138.7 million or 32 cents per share for the quarter ended Feb. 28, down from year-earlier profits of $156.6 million or 36 cents per share.
The sag in second-quarter profits came despite an 11 per cent rise in revenues, which benefited from customer growth and acquisitions in the cable division, as well as higher pricing.
Shaw reported second-quarter revenue of $929.1 million compared to year-earlier levels of $839.1 million.
Shaw’s basic cable subscriber count declined in the quarter, dropping by 1,055 customers, while digital customer subscriptions grew by more than 98,000. The satellite division recorded four per cent growth over year-earlier levels, the company added.
Meanwhile, Shaw has announced it wants to buy control of Canwest Global Communications’ (TSXV:CGS) broadcast assets, but faces a challenge from Toronto-based Catalyst Capital and Wall Street investment bank Goldman Sachs.
In February, Shaw made a $95-million offer for at least 20 per cent of Canwest’s equity and 80 per cent of the voting shares at the company once it completes a court-supervised restructuring.
