Shaw Communications says its proposed $1.6-billion takeover of Wind Mobile will provide an affordable entry into the wireless industry and an expansion beyond Western Canada where the cable and internet company has its customer base.
Company president and Shaw told analysts that it has been clear that Western Canada’s largest cable company needed to be a player in mobile communication but the costs were too high until recently.
He said the acquisition of Wind Mobile will give Calgary-based Shaw (TSX:SJR.B) a ready-made wireless operation with more than 940,000 customers, mostly in Ontario, Alberta and British Columbia.
Wind Mobile CEO Alek Krstajic told analysts that the company will maintain its low-cost approach, even under new ownership.
“The long-term strategy with Wind Mobile and our network is really one of continuing to aim at the right customer base and making sure that the value proposition is always one that is competitive,” Krstajic said.
Krstajic said he and the rest of Wind’s executive team plan to stay through the deal, which is expected to close next summer in the third quarter
Shaw has its main customer base in Alberta and British Columbia, providing residential cable TV, Internet and home phone services.
Its major competitor in Western Canada is Telus (TSX:T), which has worked to attract customers from Shaw with discount bundles that include fiber-optic TV service and its national wireless service.
The Wind purchase will put Shaw in line with Telus, as well as competitors BCE (TSX:BCE) and Rogers (TSX:RCI.B), in offering the entire slate of popular bundled services _ wireless, television, home phone, and Internet.
Shaw also operates one of Canada’s two national satellite TV services, business-oriented data centres and the Global television network, which has a significant presence in parts of Ontario where Wind operates.
The proposed deal requires a number of regulatory approvals, including the Competition Bureau and the Ministry of Innovation, Science & Economic Development.
3Macs telecom analyst Troy Crandall said he expected the deal to be approved, in part because more competition could lead to lower prices for Canadians.
“It will be seen as customer friendly because you’ve finally got a new entrant that has a strong financial backing,” he said.
Wind Mobile, which became the first of a group of new wireless providers to begin operating six years ago this week, has run into a series of financial problems as it struggled to raise the millions in financing needed to build out its network and add the necessary wireless spectrum.
Last fall, Wind Mobile founder Anthony Lacavera led a buyout and restructuring of the company that freed it of its connection to Amsterdam-based Vimpelcom and cleared the way for it to raise funds including $425 million from a syndicate of major Canadian banks to upgrade to a higher-speed network capable of supporting Apple’s iPhone.
Shaw scrapped its previous plans to introduce a mobile network in 2011, and two years later signed a deal to sell the spectrum _ which would’ve been the foundation of that network _ to Rogers (TSX:RCI.B). That Shaw-Rogers spectrum deal didn’t close until this year, after a number of inter-related regulatory hurdles were overcome.
Since 2011, the Harper government and the Canadian Radio-television and Telecommunications Commission made several changes to the rules for wireless competition which lowered roaming fees for carriers and customers.
Among the beneficiaries was Wind Mobile, which was one of the companies that emerged as competitors to Canada’s three national mobile companies _ part of the Harper government’s goal of pushing down prices while encouraging innovation.
