Calgary-based cable company will now compete in wireless against frequent collaborator Rogers.
Shaw Buys Wind:
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Shaw Communications dropped a shocker Wednesday evening with the announcement that it is buying Wind Mobile for $1.6 billion.
The acquisition of the de facto fourth wireless carrier in Ontario, Alberta and British Columbia and its 900,000-plus customers on the day of its sixth birthday, while a necessary and overdue move for Shaw, is in all likelihood bad news for Canada’s long-suffering wireless subscribers. It’s a deal that should draw close scrutiny from government, regulators and the press.
Shaw will now be in the business of competing against the Big Three national wireless providers, Bell, Rogers and Telus. If the Calgary-based cable company’s track record and existing relationships with supposed rivals are anything to go by, it’s not going to help with Canada’s problem of having the highest wireless bills in the world.
Shaw sells television access across the country via Shaw Direct, and TV, internet and phone services in Western Canada, where it competes in all three mainly against Telus.
In all cases, a quick glance at its rates shows they’re in line with competitors. The cable company has earned a reputation for “rational pricing” – or not rocking the boat against its fellow incumbents.
Against smaller rivals, that’s another story. Shaw overtly engaged in predatory pricing in 2009 by offering its entire lineup of services – TV, internet and landline – for $9.95 a month to customers of smaller Vancouver telecom provider Novus.
Wind, on the other hand, has been selling wireless service at rates considerably lower than the Big Three since its inception in 2009.
Shaw and Toronto-based Rogers are also partners in Shomi, the streaming service launched last year. Going further back, the two cable companies had a deal wherein they agreed not to encroach on each other’s television service turf, effectively carving the country in half.
Shaw is now ostensibly in a position to compete in wireless against a company it frequently collaborates with.
Operating under Shaw’s umbrella will certainly give Wind more stability, as well as the capital necessary to improve its patchy and slow network. Wind could become a viable alternative to the Big Three on quality of service sooner rather than later now, but its days of cheap service plans are probably numbered.
Shaw executives can’t seem to get their story straight on this front. Chief executive Brad Shaw told the Globe and Mail that, “I see pricing somewhat discounted, but probably closer to the incumbents as we go forward, which allows us to increase ARPU [average revenue per user]. But listen, growth is very important to us and that’s going to be a key driver, as well as making sure there’s value.”
Chief operating officer Jay Mehr, meanwhile, told the Canadian Press that Shaw has no plans to move away from low-cost services or hike prices. “This is a winning strategy that’s been created and our plan is to continue on that winning strategy.”
The contradictory statements mirror Shaw’s flip-flopping on the wireless business as a whole. The company actively lobbied the Conservatives in 2007 for special set-asides in an upcoming auction of public airwaves, then spent $189.5-million on licenses when the government came through on the request.
Yet, while Wind, Mobilicity, Public Mobile and Quebec cable company Videotron got busy with building networks with the licenses they had won in the same auction, Shaw sat on the sidelines and ultimately decided not to get into the business after all.
That decision went against common sense, with wireless clearly the telecom industry’s money pipeline of the future. The death of landline phones was well accelerated and Netflix’s immediate popularity upon entering Canada in 2010 showed the writing was on the wall for television services.
In 2013, Shaw announced it was selling Mountain Cable, a small Ontario-based cable company, and its spectrum licenses to frequent collaborator Rogers for $700 million. Shaw paid a total of $489-million for Mountain and the licenses, so the sale price to Rogers represented a hefty profit.
The Conservatives weren’t pleased with the idea, since the set-asides they had handed Shaw and other new entrants in the 2008 spectrum auction were intended to be used to boost wireless competition, not for profiteering. Ironically, Bell, Rogers and Telus had warned of such a scenario in arguing against the set-asides.
Shaw parked its plans again until earlier this year, when it cut a complicated deal with Rogers – is there a pattern emerging? – to take out struggling Mobilicity. Rogers bought Mobilicity and its 145,000 customers for $465 million, with a further $100 million going to Shaw.
In exchange, Shaw sent two of its spectrum licenses to Rogers and 16 to Wind, which also got an additional 10 licenses from Mobilicity. Rogers also got some of Wind’s licenses.
The government, previously reluctant to allow any of the Big Three to gain more spectrum through deals, allowed this one because Wind appeared to come out ahead.
Now, much of that horse-trading – and the justification for it being permitted – is being erased as the spectrum ceded to Wind will once again belong to Shaw.
Shaw has gone from uninterested in wireless to apparently very interested in just a few months, with a change in government coincidentally taking place. That should raise red flags.
The Wind acquisition requires a stamp of approval from the Competition Bureau and the federal government. While there doesn’t appear to be anything untoward about the deal on the surface, both bodies should examine Shaw’s history, intentions and partnerships when assessing whether it will be good for Canadians in the long run.