Shaw’s Perplexing Wireless Strategy

by Jordan Richardson on April 9, 2010

Shaw Communications is certainly standing out among its Canadian telecommunications competition. Unfortunately, Shaw’s “celebrity status” is happening for all the wrong reasons at this point and time and market analysts are withholding support for the company’s stock.

The Calgary-based company is experiencing problems both from its competition with Telus, who earlier poured $650 million into British Columbia to help take on Shaw, and due to some perplexity about how Shaw plans on getting its wireless wing off the ground.

While Shaw might hope that it will be able to compete in the wireless sector, a lack of clarity as to their intentions is forcing market experts to proceed with caution and to encourage their clients to do likewise.

According to the Globe and Mail’s Market Blog, “Shaw shares have tumbled nearly ten per cent” in a period when Telus, BCE and Rogers saw gains. Shaw will release its second-quarter results on Friday and it is expected that the evidence for how new competition has impacted the company will be clear in the figures.

The market uncertainty with respect to Shaw’s wireless future comes on the back of the company’s decision to put the wireless plan on hold. This decision came after Shaw purchased wireless spectrum in B.C., Alberta, Saskatchewan, Manitoba and Northern Ontario for $189.5 million. The area covered by Shaw’s purchased spectrum contains some 9.4 million people.

Despite getting a great deal on wireless spectrum and despite apparently setting the groundwork for pursuing the wireless end of things, Shaw ceased talking about the plan and said that the return on investment was not momentous enough.

Shaw’s CEO and vice-chairman, Jim Shaw, has told investors that the plan is to essentially “sit back and watch” the industry for the time being. The problem with this strategy is that it is promoting investor unsteadiness, especially considering the fact that Shaw $650 million of debt at the end of 2009 to, you guessed it, finance a wireless operation.

So will Shaw make any firm announcement regarding a wireless policy on Friday? Who knows. Analysts are understandably worried at this point, though, as there’s no telling what could happen from here.

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