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Shaw Communications Inc. (SJR)

F1Q2011 Earnings Call Transcript

January 13, 2011 3:30 pm ET


Brad Shaw – CEO

Steve Wilson – SVP and CFO

Jay Mehr – SVP of Operations

Paul Robertson – Group VP of Broadcasting and President of Shaw Media

Michael D’Avella – SVP, Planning

Peter Bissonnette – President


Tim Casey – BMO

Bob Bek – CIBC

Vince Valentini – TD Newcrest

Glen Campbell – Merrill Lynch

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Jeff Fan – Scotia Capital

Phillip Huang – UBS

Robert Goff – Northland Capital Partners

Maher Yaghi – Desjardins Securities

Dvai Ghose – Canaccord Genuity

Peter MacDonald – GMP Securities



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Welcome to Shaw Communications fiscal 2011 first quarter conference call. Today’s call will be hosted by Mr. Brad Shaw, CEO of Shaw Communications. At this time, all participants are in a listen-only mode. Following the presentation, there will be a question-and-answer session. (Operator instructions) If the press has any questions, please contact Mr. Shaw’s office after the call.

Before we begin, management would like to remind listeners that comments made during today’s call will include forward-looking information and there are risks and that actual results could differ materially. Please refer to the company’s publicly filed documents for more details on the assumptions and risks. As a reminder, this call is being recorded.

Mr. Shaw, I will now turn the call over to you.

Brad Shaw

Thank you, operator, and thanks to everyone for joining us today to discuss our results for the first quarter of fiscal 2011. With me today are members of our senior management team, including Peter Bissonnette, President; Steve Wilson, Chief Financial Officer; Michael D`Avella, Senior Vice President of Planning; Jay Mehr, Senior Vice President of Operations, FCI; Ken Stein, Senior Vice President of Regulatory; Jean Brazeau, Senior Vice President of Regulatory; Paul Robertson, Group Vice President of Broadcasting and President of Shaw Media; and Jim Cummins, Group Vice President, Shaw Satellite Operations.

This is my first opportunity to speak to our shareholders as CEO. JR started this company in 1966 and he took enormous risk and worked tirelessly. His leadership and guidance are constant source of inspiration to all of us. Jim took over as CEO in 1998 and continued to grow our business and create value for all of our stakeholders. He led many transformative acquisitions, and he oversaw the development of highly successful businesses such as digital phone, Internet, and digital cable. The legacy and stewardship of JR and Jim provide a model and source of motivation that will guide me as I take on the leadership of Shaw.

We just concluded our Board meeting and AGM, and we are pleased to announce a 5% dividend increase to an annual rate of $0.92 per share. Before discussing some of the highlights of our first quarter, I wanted to begin by outlining some of the key priorities that we will focus on throughout the year.

Focusing on our core. We are first and foremost a cable and satellite provider. We will stay focused on our core business and continue to provide an exceptional customer experience through both technology enhancements and differentiated customer service. The cable and satellite business continue to be highly profitable and generates significant amounts of free cash flow. The environment remains competitive, but we feel that we are well positioned to protect and grow our business.

We continue to believe that we have the pricing power, and we will focus on our high value and profitable bundled customers. We have a technology roadmap in place to ensure our core products and services continue to deliver our leading customer experience, and we believe the enterprise market in Western Canada provides attractive growth opportunities. We have committed additional resources to ensuring that we grow our market share in that area.

Wireless deployment. We remain committed to wireless and are excited about the opportunity it represents for our company going forward. As with all of our other significant investments of Shaw, we believe it is best to take a disciplined approach. We expect to incur between $150 million and $200 million in fiscal 2011 on our wireless initiatives, and we now expect to launch these services in our first major market early in calendar year 2012, which is approximately three months later than previously anticipated.

There are tremendous opportunities in wireless, and we know that the competition will extremely fierce. Our wireless strategy will be driven by us offering a reliable and unique product at a price point that creates value for our customers. As always, we will continue to strive to provide exceptional service that the customers have become accustomed to.

Shaw Media. We are excited about the performance of our newly acquired broadcasting assets. We closed the transaction on October 27th. And on a full year basis in fiscal 2011, we expect Shaw Media’s EBITDA to improve by approximately 10% over the prior year to $290 million and generate free cash flow of approximately $100 million. Integration is currently underway, and we are impressed with the quality and aptitude of the management team we have in place at Shaw Media. Our task will be to ensure Shaw Media is integrated into Shaw and that we find creative ways to enhance and build new revenue streams.

Before answering any questions, we will briefly turn to our Q1 results. Including Shaw Media, our revenues increased 19% to $1.08 billion and EBITDA increased 18%, excluding a CRTC Part II fee last year, to $473 million. Free cash flow for the quarter was $145 million. From the close of the acquisition, which occurred on October 27th to our quarter-end on November 30th, Shaw Media contributed $125 million in revenue, $55 million in EBITDA, and $40 million to free cash flow. This business continues to outperform our expectations, and we believe we have substantial opportunities to combine distribution content for the benefit of our customers and shareholders.

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