Shaw and Telus Wage War for Western Canada

by Jordan Richardson on January 9, 2012

The war for customers in Western Canada is heating up as Telus Corp. and Shaw Communications Inc. attempt to divide and conquer the critical market.

The fight actually began about 10 years ago when Telus launched Internet service to compete with Shaw, the dominant Internet provider for Western Canadians at the time. By 2011, Telus had grown from an initial 26,000 subscribers to 1.2 million. Shaw volleyed back, launching a home phone service designed to take Telus to task. With that venture, Shaw was able to swipe an impressive 897,000 home phone customers from Telus in British Columbia and Alberta.

Telus has been in the television game since 2005, but it took until the summer of 2010 for the company to really leverage its market opportunities with the offering of a more competitive, more compelling TV package. Telus made a significant investment, $22 billion in wire and wireless networks over the course of a decade, and expanded customer service centres.

As a result of this investment, Telus has seen its Optik TV offering grow to 450,000 subscribers. Before 2012 reaches the halfway point, Telus says it’ll hit the half million mark. Peter Bissonnette, president of Shaw, figures that about 150,000 of those customers were clients of his company but the remainder have come from outside of Shaw’s service area.

In this environment, Shaw has had to step up its promotional attack. The Calgary-based company has been offering up to $300 in prepaid credit cards and have reduced prices, but some industry analysts are saying that the deals will cost Shaw when its financial results are released this fall. The promotional approach is a direct response to Telus’ own aggressive angle.

“Shaw’s recent return to mass market promotions…reflects management’s concerns with the pace of subscriber losses to Telus,” Phillip Huang, analyst with UBS Securities Canada Inc., said in a note to clients.

Telus has been luring Shaw’s customers with offers of free HD PVRs and Samsung tablets and Huang says it’s been working well, with Shaw expected to lose around 17,000 basic television customers. That doesn’t mean that it’s game over for Shaw, however, as the fundamentals are still rather robust.

“We believe Shaw has a fundamentally strong cable business and good growth potential from its investment in broadband and media,” Huang said. “However, we would like to see more stability in Shaw’s subscriber trends and the company return to free cash flow before turning more positive on the stock.”

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