Shaw cancels cellular network plans

Shaw Communications Inc. has cancelled its plans to build a national wireless network.
People walk past the headquarters of Shaw Communications in Calgary, Alta. The company has cancelled its wireless network plans. (Jeff McIntosh/Canadian Press)

Shaw Communications Inc. has cancelled its plans to build a national wireless network.

"The economics of a conventional wireless business as a new entrant are extremely challenging," the Calgary-based company said Thursday. "New entrants lack the economies of scale and scope to compete effectively against well established incumbents."

In 2008, the company paid $190 million in a federal government auction of wireless spectrum aimed at encouraging competition by making a place for new entrants into the industry. As recently as a few months ago, the company said it was pushing ahead with its plans to launch a cell service, pledging $150 million to $200 million for a launch expected in early 2012.

Shaw will instead focus on expanding its broadband internet and Wi-Fi capacity, to be able to offer Shaw customers the ability to extend their services beyond the home.

"Given that Wi-Fi spectrum is free and there are no device subsidies, we can build extensive Wi-Fi coverage at a substantially lower cost relative to a traditional wireless network and still provide our customers with an excellent broadband wireless experience," Shaw said.

Stock reaction

Telecom analyst Maher Yaghi believes Shaw's decision to shelve its ambitions for a wireless business will impact the company negatively partly because many had assumed it would announce a wireless-sharing agreement with Rogers in the west.

"Overall, this announcement is negative from an operational perspective, as Shaw will not be able to compete head-to-head as effectively against Telus."

Shares in the company fell two per cent or 42 cents to $21.98 in early trading on the Toronto Stock Exchange.

The reversal in Shaw's plans leaves the market speculating on several potential outcomes including a decreased likelihood of a dividend boost, or even acquisition or sale opportunities, Yaghi said.

"By not building its own wireless network, Shaw is leaving the door open to be acquired by Rogers should the Shaw family be willing to sell down the road as the combination should satisfy the Competition Bureau," he said.

However, the company could also be waiting for one of the new wireless players to tank before making an offer for the company — giving Shaw an established wireless business for less than the cost of building a new network, he said.

In its release on Thursday, Shaw said it would be "risking well over $1 billion in capital expenditures" by proceeding with a wireless network rollout.

The company provided few details of what they plan to do with their wireless spectrum. Incumbents such as Bell, Rogers and Telus — or new entrants such as Globalive, Public Mobile and Mobilicity —would no doubt love to get their hands on it to bolster their own coverage areas.

With files from the Canadian Press