New building, rise in quarterly profit on display
BRUCE CONSTANTINEAU
Sun
RICHARD LAM/CANADIAN PRESS Shaw Communications CEO Jim Shaw speaks to shareholders during the company’s annual general meeting, Vancouver Thursday.
COMMUNICATIONS I When you throw a lavish party for 600 of your closest friends, hold a splashy fireworks show to celebrate the opening of your new office building, and follow that the next day by reporting a 69-per-cent increase in quarterly company profits, chances are your annual general meeting will be short and sweet with no angry shareholders asking embarrassing questions.
That’s the successful formula Shaw Communications Inc. brought to Vancouver this week as it also increased the stakes in its market-share battle with Telus Corp. by launching a digital phone service and holding a virtual lovefest of an annual meeting Thursday at the new 41-storey Shaw Tower.
Chief executive Jim Shaw — basking in the glow of sharply higher earnings of $75.7 million for the three months ended Nov. 30 — said the Calgary-based cable company is geared for success this year as Shaw and Telus invade each other’s traditional turf. Shaw has entered the telephone market, while Telus plans to launch its Telus TV service in the second half of this year.
“Nine months ago, we had no telephone customers, but now we have almost 100,000 and expect to have 200,000 by the end of this year,” Shaw told shareholders of the company’s recent entry into the digital phone business. “We intend to win the race for customer loyalty, and we take nothing for granted.”
Shaw told reporters after the 30-minute meeting that his company will consider entering the wireless market in the future.
“We’re intrigued by some of the new [wireless] technologies, such as WiMax and WiFi, but we haven’t done enough work yet to give you a solid plan,” he said. “The issue is do you want to be the fourth man to a four-man party. Right now, we’re having a hard time meeting demand on the products we have.”
Shaw and Telus each serve about 1.5 million households in B.C., and both are working feverishly to attract more business with new products.
Telus announced a long-term deal Thursday with 20th Century Fox that will give the new Telus TV service access to some of the studio’s latest films, such as Fantastic 4, Mr. & Mrs. Smith and Robots.
“We’re very confident that access to blockbusters like that will drive the acceptance of our new service,” Telus vice-president of consumer marketing Fred Di Blasio said in an interview.
The new TV service will feature video-on-demand technology that requires an ADSL link and a set-top box. Di Blasio said Telus is “absolutely thrilled” with the response to the service during a recent soft launch in Alberta.
“This service will provide people with choice, something they haven’t really had in the past,” he said. “That’s why we’ve had such a warm response to the service offering we’re had in Alberta.”
Di Blasio said Telus welcomes the phone-market competition from Shaw, which he calls a “solid, well-run company.”
“But their value proposition is pretty simple,” he said. “We try to imbed new services [in our products]. Our new TV service won’t be a ‘me-too’ service. It will be tomorrow’s TV today.”
Shaw said a lot of customers must like the simplicity of his company’s product offerings because more than 90,000 customers have bought its phone service in the past nine months. However, he insisted Shaw won’t cut prices to try to buy market share in B.C.
“We’ll compete on service,” he said. “I’m assuming there’s lots of room for both [Shaw and Telus in the B.C. market].”
Di Blasio echoed a similar pricing strategy, saying the launch of Telus TV has to be financially sound for all stakeholders.
“Customers want things that simplify and make their lives more meaningful and they’re prepared to pay for that,” he said.
BMO Nesbitt Burns telecommunications analyst Peter Rhamey said Telus and Shaw both appear to be maintaining “price discipline” in the market.
“Logic says that cooler heads should prevail and as long as Shaw gains something like 34,000 phone subscribers a quarter, maybe that’s acceptable to Telus,” he said in an interview.
Rhamey said the Shaw-Telus battle in B.C. is a natural evolution as Shaw was due to deploy new products in Vancouver, one of its biggest markets.
“We knew three years ago that Telus would launch Telus TV and it’s a strategy that makes sense,” he said. “I don’t think they’ll make a lot of money doing it but they certainly need the competitive symmetry so they can offer their customers similar bundles of services [as Shaw].”
Rhamey said increased competition means consumers should expect competitive prices on most services, even if they’re locked into contracts for a certain period of time. He noted the wireless industry suffered a huge backlash years ago when customers under contract had to pay 50 cents a minute for a service that was available in the market for 30 cents a minute.
“So when you came off your contract, you really didn’t feel like sticking around with Rogers or Bell because you felt exploited,” Rhamey said.
