Shaw Communications profits decline in Q1 amid costs for streaming service Shomi

The head of Shaw Communications Inc. says costs related to the launch of its streaming service Shomi hurt the media company’s latest quarterly results, but he is confident it will pay off.

“We believe it’s a space we have to be into and we certainly want to make sure we’re competitive in that space,” chief executive Brad Shaw told a conference call Wednesday.

The cable and media company (TSX:SJR.B) saw its first-quarter hurt by a $13-million loss related to the launch of Shomi in November, a service that provides television shows and movies on demand through TVs, laptops and mobile devices.

Shaw owns a 50 per cent interest in the joint venture with Rogers Communications (TSX:RCI.B).

Like other cable companies, Shaw has been losing subscribers to its video services amid increased competition from phone companies, Netflix and websites such as YouTube.

In the first quarter, Shaw lost 18,372 satellite and 11,923 cable users in its consumer business. Phone services lost 5,685 subscribers while its Internet services gained 11,379 customers.

The loss of subscribers came as Shaw earned a first-quarter profit of $227 million or 46 cents per share, down from $245 million or 51 cents per share a year ago.

Meanwhile, Shaw’s overall revenue grew two per cent to $1.39 billion in the quarter.

The company also raised its dividend by eight per cent starting with its March 30 monthly payout. The annual dividend rate for the company’s B shares will be $1.185 per share, up 8.5 cents, while the monthly dividend payment will be 9.875 cents per class B share and 9.8542 cents per class A share.

Analysts had expected Shaw to earn a profit of 51 cents per share, according to estimates compiled by Thomson Reuters.

Desjardins analyst Maher Yaghi said the quarterly performance was weaker than he anticipated.

“Overall, the results indicate that Shaw has still not found a sustainable way to stem the negative impact of wireless substitution, TV cord-cutting and competitive intensity from Telus on its residential operations’ profitability,” he wrote in a note.

Regardless, Brad Shaw said the company remains on track to achieve its guidance for the financial year ending Aug. 31.

Shaw’s first quarter ended before a major decline in oil prices that began in November and is anticipated to have some effect on the company’s performance in Alberta and other western provinces where it has its main base of cable, Internet and home phone subscribers.

However Brad Shaw said the slide in oil prices does not necessarily mean trouble for the company.

“We look back at other times with recession periods. We’ve (not) been recession proof but resilient because we’re in homes and people tend to stay home more, not going out, or movies or having dinner,” he said.

Within the divisions, quarterly revenue from its consumer businesses was down 1.9 per cent at $927 million, while media revenue was down 5.5 per cent to $307 million.

Shaw’s revenue growth came from an $8 million increase for business network services, which accounted for $127 million of revenue in the quarter ended Nov. 30, and a $55-million increase from business infrastructure services, which didn’t generate any revenue a year earlier.

The company expanded into the business infrastructure sector with its US$1.2-billion acquisition of ViaWest Inc., which closed in early September. The Denver-based company that operates 27 data centres in eight U.S. markets.

Aside from its consumer and business services, Shaw also owns Global Television and 19 specialty channels including Food Network Canada, HGTV Canada, History, Slice, National Geographic Channel and Showcase.

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