Shaw CEO puzzled over Rogers’ slowdown in attracting new cable subs

Shaw Communications is seeing few signs of an economic slowdown in its home operating territories, according to financial and subscriber results released last week. The company added 9,198 new basic cable subscribers in the quarter, versus 8,138 in the same 2007 period. Digital customers grew by 60,717, compared to 39,496 in 2007. Digital phone subscribers increased from 50,339 to 56,597. However, Internet subscription uptake slowed, at 31,152 net new subscribers, compared to 34,719 in the same period in 2007. Both Shaw and Cogeco Cable Inc. faired much better than Rogers Communications with some suggesting its poor numbers reflect execution problems on the cable front. Given Cogeco's exposure to the industrial heartland of Canada, which is getting hit hard by the recession, this makes Rogers slowing growth in its cable business all the more puzzling. "When the Rogers numbers came out ...Is there something happening in the marketplace that we should know about?" says Jim Shaw. "The only thing we would like to know is: Are we in the margin range? Are there specific capital inputs that we haven't thought about?" Shaw didn't answer his own rhetorical question, leaving it to the listener to assume that the problem has more to do with Roger's execution than anything Shaw is seeing in the market. On January 6 Rogers chair and acting CEO Alan Horn blamed the economy, saying that the company's cable numbers reflected "the challenging economic backdrop." Rogers added only 4,000 net new basic cable subscribers in the fourth quarter, compared to 20,000 in the same period in 2007, and gained 61,000 digital cable subscribers, flat from the previous year. Jonathan Allen, an analyst with RBC Capital Markets, advises caution in jumping to conclusions with Rogers' numbers. "Rogers' numbers were pretty much in line," he tells Tech Media Reports. "It's hard to come to conclusions based on Rogers' subscriber numbers until you see the financials - this is only a small piece of the equation." That said, Allen agrees that Shaw's business is in good shape. "Digital phone is probably $40 to $45 a head, and there are no content costs - it is very profitable." Allen also implies that Shaw has plenty of room to grow in its core market, "Shaw's digital phone penetration is about 20%, whereas Videotron's is 30%." This adds weight to the argument that there is no reason for Shaw to rush into the wireless market in 2009. On the call Jim Shaw made it clear that the company is in no hurry. "We are concentrating on core business rather than chasing gold mines," says Shaw. For the three months ended November 30 Shaw reported net income of $123.1 million, up approximately 10% to $112.2 million for the same period in 2007. Revenue was $817.5 million, as opposed to $743.8 million a year before. The company also provided an update on its plans to roll out DOCSIS (data over cable service interface specification) 3.0. Next month DOCSIS 3.0 will be deployed in Saskatchewan, then over the next six months in Calgary, and beyond that to all of the company's major markets during the balance of 2009.

Shaw CEO puzzled over Rogers’ slowdown in attracting new cable subs

Broadcast | January 19, 2009

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