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Shaw Communications' CEO Discusses Q2 2012 Results - Earnings Call Transcript

Stocks in this article: SJR

Last week, we announced a strategic marketing agreement with Xplornet that will enable us to offer a bundle of services to our Shaw Direct customers. Over time, we believe this partnership will help grow our DTH business and improve the financial performance of our satellite assets.

Over the years, Shaw Communications has consistently delivered strong customer results and industry-leading financial metrics. We have faced competitive pressures from IPTV threats for a number of years. However, 2011 was the first year we actually lost cable subscribers.

Our major telco competitor has rolled out their IPTV product across the majority of our cable footprint in Western Canada and continues to employ an aggressive market share strategy. This strategy is predominantly focused on heavily subsidized equipment and promotional offers aimed directly at our video customer base.

On our last conference call, we discussed a change in our tactics regarding our approach to the competitive environment. Throughout the quarter, we initiated a variety of packages and offers, and the results of these subscriber acquisition strategies are evident in our Q2 results.

During the quarter, we added over 60,000 core RGUs compared to 11,000 in Q1 and 30,000 a year ago. Our basic subscriber losses moderated to less than 10,000 this quarter compared to a loss of 23,000 3 months ago.

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. We view the majority of these expenditures as core investments that provides long-term benefits for our company, but we do not anticipate that our cable operating cost structure to be reflective of the Q2 run rate of $450 million going forward.

The core of our strategy has always been customer service, and our operations are now fully staffed, including the 3 additional locations in Calgary, Vancouver and Edmonton in December. Call center staff have undergone additional training and have the ability to perform inbound and outbound calling, which will help us manage peak periods of call volume activity. We continue to develop more online, self-serve functionality as another avenue for our customers to reach us. We believe that the majority of our customer service issues are behind us and that reestablishing our reputation as a customer service-focused organization is of utmost importance to us.

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