Shaw, Rogers, focus on sustaining overall wireline customers

Canada's largest two cable companies are trying to offset subscriber losses in their television segments by cutting costs and focusing on growing their Internet customers, the companies and analysts said. Shaw Communications Inc., in its fourth-quarter results, reported higher revenues and profits as it lost a net 70,703 cable TV subscribers in the 2012 fiscal year, nearly 20,000 more than its net loss of 50,988 in 2011. Shaw on Thursday reported its 2012 year-end results for the fiscal year that ended Aug. 31, 2012. Cableco Rogers Communications Inc., Canada's largest cable company, is also facing pressure on the television front from fibre-based, IPTV competitors. The company said in a third-quarter financial statement this week that it experienced a net loss of 58,000 cable TV customers for the first nine months of the 2012 fiscal year, 50,000 more than its total annual net loss of 8,000 in 2011. Steve Wilson, senior vice-president and chief financial officer at Shaw, said on a conference call with analysts Thursday that the cable subscriber losses are a “very small number on a very large base.” “With 2.2 million video customers and 1.9 million Internet customers, we're an awful long way from having that discussion,” he said in response to a question about whether cable customer losses could at some point affect the company's bottom line. He said Rogers, like Shaw, is losing cable TV customers and that Shaw is aiming to sustain its overall customer numbers across the company. “We're balancing the profitability and we're balancing maintaining that stability. You will see some leakage, but the main thing is that, through pricing discipline and promotional discipline and cost discipline, our margins have improved by 60 basis points from the second quarter,” he said. Rogers' and Shaw's main competition from fibre-based TV competitors comes from BCE Inc. and Telus Corp., respectively, which continue to expand IPTV services into the cablecos' operating territories. The Wire Report reported that, in the 2011 fiscal year, Telus added 194,802 TV subscribers, the most of all the major Canadian TV distributors. BCE's Bell Canada and Bell Aliant divisions, which offer IPTV, added 68,000 and 27,764 TV subscribers, respectively, in 2011. The same year, Rogers and Shaw posted net losses of thousands of TV subscribers. Scotiabank analyst Jeff Fan said in a research note Thursday that Shaw's net loss of 16,474 TV customers during the three-month period ending Aug. 31 was better than his estimate of 20,000. “We believe the competitive environment is stabilizing with improvement in ARPU trends as well,” Fan wrote. In a separate research note Thursday, Fan said Rogers is also focused on growing its Internet customers to offset TV losses. “Specifically, we believe Rogers is beginning to target satellite subscribers and Bell DSL customers in non-Bell Fibe territories,” Fan said, referring to Bell's fibre-based IPTV and Internet service, Fibe. RBC analyst Drew McReynolds said in a research note this week that Rogers' television growth has been "stunted by increased promotional and retention activity in the face of aggressive IPTV competition, offset in part by core price increases as well as a higher penetration of premium television offerings" like video-on-demand and personal video recording services. "Internet revenue growth continues to benefit from increased data consumption," he added, which has risen 20 to 25 per cent per year. The company's Internet services are also benefiting from customer migration to higher-tiered plans as well as 20 per cent-per-year rises in revenues from the business market. "During the quarter, Rogers increased the regular monthly prices, the downstream speeds on select plans, and the maximum overages on its Internet data plans," McReynolds said. Shaw's cable revenue of $803 million during the fourth quarter was higher than RBC's estimate of $792 million, McReynolds said in a separate research note this week, adding that the company's cable subscriber losses during the quarter were an improvement from a net loss of 22,000 in the third quarter of 2012. Shaw reported profits of $133 million during the fourth quarter of 2012 and $761 million during the 2012 fiscal year, a 36.1 per cent rise from profits of $551 million in 2011. Cable television revenues rose 3.1 per cent, from a total of $3.09 billion in 2011 to $3.19 billion in 2012, the company said. Its total revenues rose 1.1 per cent from the third quarter of 2012 “primarily due to rate increases, lower promotional activity and Digital Phone growth,” which was partially offset by the drop in cable subscribers, the release said. Shaw reported a total of 2.2 million television customers as of Aug. 31. The company's total Internet customers were 1.9 million, the company said, with net Internet subscriber additions of 6,062 during the quarter and 34,999 in fiscal 2012. Shaw's annual Internet subscriber growth slowed from the previous fiscal year, when it added a net 54,217 Internet customers. Shaw added 1,140 satellite TV customers during fiscal 2012, growing its total satellite customers to 910,023, the release said. Rogers reported 1.84 million high-speed Internet subscribers as of Sept. 30. The company said it added a net 29,000 Internet customers during the three-month period ending Sept. 30. Shaw said in the release that it has discontinued any construction of a mobile wireless network, which it has classified as “discontinued operations.” The company last year instead announced a WiFi network build out for use by its customers. Shaw is focused on expanding and improving its services and investing in WiFi, digital network upgrades, a new online and mobile TV service, and improving customer service, the company said. news@thewirereport.ca

Shaw, Rogers, focus on sustaining overall wireline customers

Broadcast | October 25, 2012

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Shaw, Rogers, focus on sustaining overall wireline customers

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