Pillars of Shaw Communications’ growth ambitions face uncertainty

CALGARY — Uncertainty is weighing on two of Shaw Communications Inc.’s make-or-break strategic moves: its long-awaited push into wireless and its ambitions to pick-off Canwest Global Communications’ broadcasting assets.

CALGARY — Uncertainty is weighing on two of Shaw Communications Inc.’s make-or-break strategic moves: its long-awaited push into wireless and its ambitions to pick-off Canwest Global Communications’ broadcasting assets.

Investors have been getting antsy over what the Calgary-based cable giant (TSX:SJR.B) intends to do with the wireless licences it has been sitting on for nearly two years.

“Shaw Wireless is still a big unknown factor,” wrote RBC Capital Markets analyst Jonathan Allen in a note to clients.

Shaw is set to report its second-quarter earnings Friday, followed by a conference call with analysts, who will likely press executives for details on the company’s wireless plans.

Shaw confirmed earlier this year that it plans to take the first steps toward a wireless entry in 2010, and that it sees the business being close to deployment early next year.

It has enough cash on hand to launch the wireless business — more than $600 million.

However, Allen said investors are anxious to know how much the plan would cost, what its marketing plans are, what sort of network it would use and what the potential impact could be on dividends.

“Either Shaw has not decided yet, or they are keeping investors/competitors guessing,” Allen said.

New wireless players like Public Mobile and Globalive have already brought their offerings to market since Ottawa opened up the industry to new entrants in May 2008.

Shaw, meanwhile, has done nothing yet with its $190-million investment it made in wireless spectrum.

At the same time, the company has been facing a challenge from Telus Corp. (TSX:T), which has an established wireless business and a growing television business in Shaw’s Western Canada stronghold.

“(Shaw’s) legacy business is robust, but not really growing. It’s mature, whereas wireless has nowhere to go but up,” said media industry analyst Carmi Levy.

“Unless Shaw can kick the pedal to the metal on this, investors are going to get frustrated. As a result they’re voting with their pocket books and they’re getting out of the shares.”

There has been speculation that Shaw could partner with Rogers Communications Inc. (TSX:RCI.B), but Levy was dubious.

“The only potential upside to that is one of scale, but really I think a partnership with Rogers for Shaw at this point would be an admission that it couldn’t do it on its own,” Levy said.

Meanwhile, Shaw and a private equity firm backed by Wall Street investment bank Goldman Sachs face a battle for control of Canwest Global Communications’ (TSX:CGS) broadcast assets.

In February, Shaw made a $95-million offer for 20 per cent of the Canwest operations, which have been restructuring under court protection from creditors. Shaw would get 80 per cent of the voting shares.

Goldman Sachs, which owns 65 per cent of Canwest’s specialty channels, filed court documents earlier this month seeking to thwart the Shaw deal.

Goldman Sachs supports a $120-million offer from Catalyst Capital Group. The Winnipeg family that founded Canwest, the Aspers, backs that offer, which would get Catalyst a 32 per cent equity interest and voting control of the company.

Shaw likely underestimated how fiercely Goldman Sachs would oppose its offer for Canwest, but has no choice but to “dig in for the long haul,” said Levy.

“It is going to be an expensive, ugly process. They are so deeply into the offer right now that they simply cannot go back,” he said.

Calling it a “bet-the-company move,” Levy said buying Canwest’s broadcast assets is the only way for Shaw to expand its geographic and market reach.

“Shaw really needs this. It really needs this to happen now. And it can’t afford to have this drag on for too much longer,” Levy said.

“So it will essentially commit every last legal resource that it can to make sure that it ultimately prevails.”

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