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Shaw Communications Inc. (NYSE:SJR)

F1Q 2014 Results Earnings Call

January 14, 2014, 03:30 PM ET

Executives

Bradley Shaw - Chief Executive Officer

Steve Wilson - Executive Vice President Corporate Development and Chief Financial Officer

Jay Mehr - Executive Vice President and Chief Operating Officer

Paul Robertson - Executive Vice President and President, Shaw Media

Analysts

Jeffrey Fan - Scotia Capital Markets

Vince Valentini - TD Newcrest

Phillip Huang - Barclays

Drew McReynolds - RBC Capital Markets

Tim Casey - BMO Capital Markets

Greg MacDonald - Macquarie Securities

Matthew Niknam - Goldman Sachs

Maher Yaghi – Desjardins Securities

Operator

Welcome to Shaw Communications Fiscal 2014 First Quarter Conference Call. This call is being recorded. Today’s call will be hosted by Mr. Brad Shaw, Chief Executive Officer of Shaw Communications. At this time all participants are in a listen-only mode. Following the presentation there will be a question-and-answer session.

Please also note that an investor slide presentation in relation to the conference call is posted in the Investor Relations section of the Shaw website under Presentations and Meetings and Press Releases. (Operator Instructions). If the press has any questions, please contact Mr. Shaw's office after the call.

Before we begin management would like to remind listeners that comments made during today's call will include forward-looking information and there are risks that actual results could differ materially. Please refer to the company's publicly filed documents for more details on assumptions and risks.

Mr. Shaw, I will now turn the conference call over to you.

Bradley Shaw

Thank you, Operator, and thanks to everyone for joining us today to discuss our first quarter fiscal 2014 results. With me today are members of our senior management team, including Peter Bissonnette, President; Steve Wilson, Executive Vice President, Corporate Development and CFO; Jay Mehr, Executive Vice President and Chief Operating Officer; and Paul Robertson, Executive Vice President and President of Shaw Media.

Earlier today we held our Annual General Meeting and released our Q1 results. As we continue to execute on our strategic priorities we remain focused on sustainable pricing initiatives, customer retention and long-term growth.

Reported consolidated revenue and EBITDA were up over 3% and 1% respectively in the first quarter and we generated over a $155 million in free cash flow. Adjusting for the net impact of acquisition and disposition activity in fiscal 2013 EBITDA was up 2% in the quarter compared to a year ago. Our performance this quarter was driven by growth in our commercial business, discipline around customer acquisition and continued strength in our Internet business.

Global continued to deliver solid programming results with the Blacklist which is in the top 10 and Sleepy Hollow. Global News maintains the number one position in all three major western markets. Our specialty portfolio continues its top five digital positions in the adult 25 to 54 category.

Shaw Business is becoming an increasingly important contributor to our consolidated performance. Recently we announced a multi-year agreement with Canad Inns to deliver TV, voice, Internet and data services to its 16 locations. We also continue to have success with Oil Sands camps in Northern Alberta with another project for Husky. We believe that we have considerable growth opportunities in this segment and that we can deliver another year of approximately 20% growth.

With Q1 off to a solid start we remain on track to meet our fiscal 2014 revenue, EBITDA and free cash flow targets. I am pleased to announce that today our Board approved an 8% dividend increase to a $1.10 a share which will become effective at the beginning of March. This increase continues our strong track record of returning capital to shareholders as well as showcasing the confidence that the Board and senior management have in the long term free cash flow profile of our company.

In F'14 we will continue to invest in our leading network infrastructure and delivery of next generation services, which we believe will continue to drive growth into the future. During the quarter we completed our DNU project which has allowed for significant increased capacity in our network. As the Internet commands a bigger role in everyone's life, customers expect better content, connectivity and convenience. Now and in the future we firmly believe that the Shaw broadband experience will set us apart from the competition.

Our Wi-Fi network now consists of over 30,000 access points and more than 300,000 customers have signed up to enjoy this value-added service. Last month we also announced that Shaw was the successful bidder to provide the City of Calgary with public Wi-Fi in city-owned locations. We've now secured agreements with 38 municipalities to provide Wi-Fi service and continue to focus on high value sites deploying a larger and denser footprint.

Complementing Wi-Fi we've recently launched three additional Shaw Go apps, Treehouse, YTV apps and A&E, bringing our total to seven different apps that provide our customers with TV Everywhere capabilities. Global Go, which was launched in September is live with seven BDUs reaching over 72% of Canadian paying television households.

With F'14 off to a solid start we remain committed to executing on our strategic priorities regarding delivery of exceptional customer and viewer experiences, leverage our leading technology, maintain and grow customer profitability and realize further operational efficiencies. We continue to invest in our Calgary data center, additional bandwidth upgrades, further Wi-Fi expansion, IT transformation and IP delivery.

We're taking steps and making changes as a management team to improve our decision making process to sharpen our focus and prioritize our project so we operate more effectively and efficiently to serve our customers and viewers. As change continues to shape the industry for both our customers and our company we're excited about the possibilities and the future of Shaw.

Thanks to everyone for joining us today. And we would now like to open the phones to answer any questions, operator.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). Our first question comes from Jeff Fan of Scotiabank. Please go ahead.

Jeffrey Fan - Scotia Capital Markets

Hi. Thanks, good afternoon. Couple of quick questions. First on the satellite business, and obviously you guys are going through a little bit of an adjustment there with launch of additional content in the new satellite. Wondering if you could just help out with where you think the long-term margins for satellite could settle -- where it could settle? And also just give us a bit of a review of the exposure of your satellite subscribers, i.e. the percentage of subscribers that you think are in more rural and less competitive markets.

Steve Wilson

Why don’t I start, Jeff? Really the big difference from last year we were at $74 million EBITDA going down to $66 million is really two things; the transponder cost and in our last press release we indicated that there are $2 million a month, so that people could model that and then in addition to that we have network fee increases. And so that really is -- there’s some other things that net there through but that really accounts for the difference.

In terms of the next quarter we expect a marginal improvement. We do have some rate and packaging changes that we are going to be making and we are also going to be taking advantage of revenue from rental equipment from customers. So I think we were kind of surprised at where analysts came out on this and there is really not much change from Q4 to Q1 either.

Jay Mehr

Yeah and it’s Jay following-up on Steve's comments and I think you start to build from there. Your question about exposure, Jeff, for sure the majority of our customers are rural although we are certainly not immune to competition as these numbers suggest. And in general terms if you want to go one-third, two-third with two-thirds rural in our customer base. Nationally I think that’s the right way to think about the business, because we are primarily rural the losses that we are seeing were competitive not substitution.

That having been said we have a new management team we are completely focused, we are focused on rural and underserved communities, we’ve got a great product offering, we’ve got strong customer staff scores continuing. And so I think we have an opportunity to rebuild from here.

Jeffrey Fan - Scotiabank

Okay, great then just to ask a big picture question. If we look at what’s going on in the U.S. with respect to the whole consolidation trend, and given where the industry is going competition, higher content cost and technology spending, I guess there is an argument there that where greater scale within the cable industry certainly helps offset some of those trends, higher cost content and technology spend.

Just curious where you guys stand on that, or do you think some of those trends are really going to affect the Canadian market as well?

Bradley Shaw

Hey Jeff, it’s Brad here. Just a couple of things on that. One, I think there is certain advantage to scale and size. I think from that point of view you are going to look at opportunities but I also look just where Shaw’s at, our complete focus on what we need to do in regards to our activity and the competitive nature we are in, and the fast changing we are in. You know we need the attention of the team and focus on operations.

I think at the end of the day you look at where consolidation could or couldn’t happen and we are very comfortable with what we have now. We are very focused on Western Canada from a cable point of view and it goes beyond that when you look at median satellites. But we are comfortable where we are and we really focused on what we need to do.

Jeffrey Fan - Scotiabank

Okay thanks. Brad.

Operator

Thank you. Our next question comes from Vince Valentini with TD Securities. Please go ahead.

Vince Valentini - TD Newcrest

Yeah, thanks very much. Couple of things. First if I take this cable revenue over your average subscribers it looks like the ARPU was up just over 8% year-over-year but I don’t think that’s quite the case because you’ve got the end vision in there. Can you help us to understand what sort of the underlying consumer ARPU picture is and can you give us any color on envisioned revenue in the quarter and what kind of revenue per customer you get in that segment?

Steve Wilson

So Vince first of all on acquisitions and divestment, if you look at quarter over Q1 over Q1 we are down $10 million as a result of sales of Hamilton and we are up $5 million as a result of sale of Envision, just on the disposition. On the business side we’ve been able to integrate Envision and we are actually ahead of our expectation for what that is doing for our business overall. There is additional revenue that doesn’t translate into ARPU from carrier and wholesale sales and other elements of our business that make it difficult to do that ARPU calculation.

What I will say is on the video ARPU side we are seeing that at just over $62. That’s up for an average of $60 last year that partly the rate increase and partly some of the video-on-demand and on Internet we are up about $4 on an average from last year and that was the $5 rate increase that we put through.

And our Internet product ARPU, just to remind people it’s $54 which is still a tremendous bargain when you consider that our average customers using 52 gigabits per month on that service.

Vince Valentini - TD Newcrest

Sorry, Steve the $10 million and the $5 million those are revenue per year or EBITDA?

Steve Wilson

EBITDA.

Vince Valentini - TD Newcrest

Yeah, got you. Okay the second one then, just an accounting one sorry, but there is a pretty big change in depreciation from the fourth quarter to the first quarter it dropped $30 million. Is anything unusual there or should we look at Q1 as a new normal run rate?

Steve Wilson

I would say look at Q1 as a new normal run rate. We did do some adjustments. One of the biggest one is that we were depreciation fiber for 15 years. The standard in the industry is 15 to 30 years. 15 is obviously a short period so we moved that to 20 and that affects the amortization.

We made some small changes in other areas like vehicles and modems. We’ve also moved our DCT, we had DCT’s initially at two years for deferred equipment revenues and deferred equipment cost and we’ve moved that to three years with the experience we’ve had with how solid the gateway is now and how solid the overall platforms are. So in total for the year you can expect that that will amount to approximately $100 million pretax and then pay taxes of the $30 million say net income of $70 million.

So I hope that helps with your EPS calculation?

Vince Valentini - TD Newcrest

No, that’s very helpful and let me try to ask one may be a little bit more interesting non-accounting question. Wi-Fi any update there on the usage stats and I think last quarter you talked a little bit about the turn reduction you get for the people who use it. Can you just give us an update on how that’s trending.

Bradley Shaw

Sure Vince, this is Brad. I think we are still seeing the benefits of Wi-Fi on the term side and we still are excited about the opportunities you look at, and I think we mentioned about the customers are using about a gigabits of data a month on the Wi-Fi service. When I look at the sheer amount of time they are spending on it there is tremendous value from an economical, to get economical high speed service outside your home on a value add is an incredible proposition.

And when we look at what the usage is and what people are using for video, streaming, face chat or Face times or I don’t got all the words right. But it's -- so it's going very well. We can still continue to focus on our municipal build and we just got the City of Calgary as you know and we continue to work with about another a total of 90 municipalities and we continue to see customers sign off in a significant way day-in and day-out and devices are even growing faster than that.

So we are very comfortable where we are at and we are still very focused on building the network, building and executing sign-ups in regards to customers and so that’s really our focus in the short term but we are still very pleased with how it's all going.

Vince Valentini - TD Newcrest

Okay, guys. Thanks so much.

Operator

Thank you. Our next question comes from Phillip Huang with Barclays. Please go ahead.

Phillip Huang - Barclays

Hey, thanks, good afternoon, guys. Question on, more on the wireless side. I know Shaw is currently focused on using Wi-Fi to extend your services outside of the home. But with the government looking to regulate wholesale wireless rates was wondering whether this could create some opportunity or optionality for Shaw, was wondering maybe you could talk a little bit about thoughts on this development? Thanks.

Bradley Shaw

Phillip, it's Brad here. We are very comfortable with where we are at now. We love our broadband play, we love the extension of broadband with Wi-Fi. We think it’s tremendous economical value to our customers. And you are going to continue to see us focus there, you know what’s changed or what actually is going to change and what that structure is, hard to know where things are going to go. But we are very focused on what we are doing and we have a big commitment in Wi-Fi. It is a little bit of gold rush. So we are pushing as well as we can to make sure we execute and deliver and you are going to see us continue to focus on that.

Phillip Huang - Barclays

Got it and a quick follow-on the over-the-top, there’s certainly been a lot more talk about cables launching their own OTT service lately. Was wondering if you give us an update on your thoughts on that, both in terms of the opportunity to potentially grow through may be a bundled created with over-the-top service as well as the potential re-pricing or a cannibalization impact on your existing subject if you were to go down that path and what you might be able to do to mitigate that?

Bradley Shaw

Okay, Phil, couple of things on that. I think one for sure, with our TV Everywhere strategy authenticated back for the cable and satellite customer, our IPTV customer, certain value on that and we like that proposition but we know that’s not the only solution. And I think you are having a number of, I am not knowing where the other industry players are at, but everyone is talking streaming, what other opportunities are there, ready to play in the OTT space or not, and you know I think that’s been a constant for the last little while and we’ll update you as we go along, but I think everyone is looking at where to be able to plan that space and how you can be successful.

Phillip Huang - Barclays

Great, thanks very much.

Operator

Thank you. Our next question comes from Drew McReynolds with RBC Capital Markets. Please go ahead.

Drew McReynolds - RBC Capital Markets

Yeah, thanks very much. Thanks for taking the questions. Just, I guess it's for you, Paul just on the Media side. I think when you strip out the adjustment, I think results were a little bit below our expectations and I know over-the-top comp may be could you comment on just the trends you are seeing in professional TV advertising and conventional advertising?

Paul Robertson

Hey Drew. Yeah, based on the first quarter, the data we have is that from an industry-wide standpoint it was a little softer quarter, from an air time revenue standpoint than we obtained a year ago. And when you strip it down and it really came from one market in particular, which was B.C., that was down sharply from last year. And analyzing that further it was an election year in B.C. with a lot of money garnered due to provincial elections.

So there was from a comparison standpoint it really was kind of a downtrend but really isolated to B.C. So we also a year ago there were no hockey in the mix and this year hockey is back in. So I guess our expectation is that we will start to see a more positive trend in the second quarter from an industry-wide standpoint but that's the general trends that we're looking at.

Drew McReynolds - RBC Capital Markets

Okay. And just on the subscriber revenue side of the equation, obviously there is a lot of focus out there on program and cost inflation for satellite and cable. And just wondering given your portfolio channels, obviously ex the sports genre, no doubt the best in Canada, just wondering your degree of pricing, power and your ability to put through rate increases, is it changing at all, is it eroding, just if you can talk to that dynamic as you kind of look forward?

Paul Robertson

You are asking on the Media side or on the Cable side?

Drew McReynolds - RBC Capital Markets

Yeah, in terms of your broadcasting channels

Bradley Shaw

Subscriber rate increases?

Drew McReynolds - RBC Capital Markets

Yeah.

Paul Robertson

Yeah. Okay. It’s Paul here. When we first that came in, we did longer-term arrangements that had some built-in increases year-on-year. And so we've enjoyed generally speaking a pretty good growth trend on revenue on our deals with the other BDUs. So that's what we've been seeing. You get some erosion of subscribers that offsets those original numbers but for the most part we're seeing sort of mid to high single-digit is our expectation on subscriber revenues.

Drew McReynolds - RBC Capital Markets

Okay, okay. Thanks very much for that. And just kind of a more boring question here, in terms of the annual merit adjustments that you alluded to in your MD&A, just to flush out are these significant in the quarter and is it just a Q1 event that kind of routinely happens on an annual basis or is there something else going on?

Steve Wilson

No, you are exactly right, Drew. This is a Q1 event that happens and I would say, it’s both the increase from additional employees over last year was not substantial and then just the overall merit increases are going to be a first quarter event. And also the first quarter is normally where we see our network fees and content costs going up just by virtue of the way the contracts are done.

Drew McReynolds - RBC Capital Markets

Okay. That's great. Thanks very much.

Operator

Thank you. And our next question comes from Tim Casey with BMO. Please go ahead.

Tim Casey - BMO Capital Markets

Yeah. Thanks. Could you talk a little bit about some the timing of rate increases through the year and whether we should expect any moderation or acceleration in revenue growth outside of the -- on the cable business. And I am assuming that base subscriber loses your expectation is that they would remain at about the rate you lost in the first quarter?

Jay Mehr

Tim, it’s Jay. We are on a September, generally on a September rate change environment in terms of our existing base and I think you can kind of annualize that going forward. Throughout the year there is a series of pricing and packaging changes that happen to help us be more competitive in the marketplace, in terms of the base if you talk -- think about September.

On the cable side we do have some grandfathered packaging, whether its customers who are paying less than retail rates and we’ve grandfathered them for a few years. So from time-to-time we do some mid-year clean-up of the grandfathered rates, but we are largely in a September rate increase cycle.

In terms of your question about subscriber loses, it's interesting we've been right around the same level for the last four quarters. So I think you can see a sense of what would appear to a constant trend. What’s interesting is on the video side of the business is our competitive losses have dropped significantly over that period of time and you are really starting to see equal pressure, competitive and substitution in both the video and phone side of business on cable.

Tim Casey - BMO Capital Markets

Are you implying you are seeing -- you are starting to see real cutting losses out there now?

Jay Mehr

Yeah I think if you look at substitutions generally customers have choices, and we are not seeing it in the satellite business and we are not seeing it on the home Internet business. Customers have choices and I am not sure we would use that word but for sure some of our voice customers are staying with us and disconnecting their voice and for sure some of our video customers are staying with us on Internet and moving to other ways to receive video within the whole eco-system.

Bradley Shaw

And it's not just of our rate Increases Tim. Our promo costs are well in line and for managing the promotional environment here and it is a stable market so that helps as well. And also when you move into an environment where you don’t have promo hoppers you get an advantage from significant lower bad debt exposure. We are well below 1% in our bad debt in cable and below that in satellite what is an excellent performance and really ties back to quality of the customers, when you look at people who aren’t promo hopping and are staying with you. So I think that’s the focus as well.

Paul Robertson

I think on top of that Tim you have on the market here you have mobile or ILEC competitors with certain offers and one out there is pretty aggressive at $10 for a home phone. And so it's going to drive awareness from the consumer point of view and they are going to make choices around that.

Tim Casey - BMO Capital Markets

Thank you.

Operator

Thank you. Our next question comes from Greg MacDonald with Macquarie. Please go ahead.

Greg MacDonald - Macquarie Securities

Good afternoon, guys. I wanted to ask you question on the Internet side of things. You spoke Brad about the Wi-Fi value proposition. One thing that’s interesting to me is you put through a rather large price increase through the Internet side. And what I am wondering is, is there anything that you can share with us on the churn metrics, on the customer mix metric, anything like that, just through a traditional wireless type metrics that might help us understand whether the ROI case for Wi-Fi is improving given the moves that you made? And whether there is a suggestion or a look forward that we can have that revenue and margin improvements might come from the moves that you made in Internet.

Bradley Shaw

Well a couple of things and may be the guys will add in here. I think certainly just as you said a $5 increase and to see the impact it’s had on the customer and the reaction has been, I think very positive I think customers are finding that if you want to get into to me on wireless metrics and stuff I wouldn’t be the guide to talk to about that.

Greg MacDonald - Macquarie Securities

Maybe I can clarify, want to make sure I am clear. So in the Internet side of things are you seeing an increase in churn as a result of the price increase and if you are is that an increase in churn at the low ARPU side of the equation which might be acceptable if you are actually keeping more of those high ARPU customers, that’s kind of stuff I am looking for.

Steve Wilson

Hey Greg it's a real easy answer, there is no way increase in Internet churn as a result of the price increase.

Greg MacDonald - Macquarie Securities

Okay, so if we saw an Internet number on the positive side at about 3,000 which was slightly lower than the Street expected. Is there a trend that you can point to that’s occurring there if there is no increase in churn does that naturally mean that your gross adds are declining?

Bradley Shaw

Yeah if you want to talk about the trends in the internet business and I think let's just start with a background point to begin with. I mean I think the Internet product is fundamentally changing and so if you think about our Internet product in 2009 we sold an Internet product into our customers home that may even have been plugged in a modem, may even have been plugged in physically to a desktop. There was a router in the home that was supplied by the customer and then may have been a laptop potentially a very early smartphone attached to that.

You think about the network experience that we are providing customers today with multiple devices at the home, access to everything Steve talked about some of the usage, extension of 30,000 additional hot spots, where customers go as part of the package. It’s hard to look through the pricing and packaging on the Internet through the lens of the Internet in 2009.

If you look at our internet subscriber numbers, I mean we have last number of quarters we have had one, we had a nice uptick in Q4 with our students but we've been in single-digit positive for most of the rest of the way. And that's not a number that we're happy with. We clearly want to do better than that. If you add some mechanics to that remember our primary competitor as they buy business with free TVs and free iPad, it’s not just a TV business you have to pull the Internet with it in order to receive the gift.

And so start with that level of movement on the Internet business and then you start to rebuild back from there. I think for sure going forward this is a big part of our future and we have given a clear direction to our marketing team that this is our singular focus is to use our Internet experience to grow our internet business.

Greg MacDonald - Macquarie Securities

So, then just to be clear, it seems like that there hasn't been a lot of change in the internal metrics on Internet as a result of the price increase. And the reason I ask you this it’s a rather large price increase, one would have assumed there was churn risk in taking that price increase yet. I mean at least I am thinking that there is this opportunity to actually upgrade the sub base that might supersede that risk or justify that risk.

And I am trying to figure out whether anything is changing or maybe it’s too early or maybe we are a quarter too early maybe we will see some movement in the second quarter or am I just wrong. Is this is just a price increase that's being passed through and everyone is taking it?

Bradley Shaw

I think as I said before Greg, $54 for usage as Jay pointed to when you look back a couple of years people weren’t using 52 gigabits on average per month, it was a very different service. We see people who are considering to upgrade their server, so within a flat RGU number there are people who are upgrading and paying more for their Internet.

And I think it’s what you don't see at ease is that it's early days for us on Wi-Fi. We did a slow, a quiet launch there. We wanted to make sure we had an extensive network that our customer's would be able to enjoy the value when we came out of the gate. We started that in November. We've run some Christmas campaign. And so we are really at the beginning stage of now educating our customer's on Wi-Fi in a more substantial way and just having another stand what a true differentiator that remains the broadband experience what a true differentiator that is in this market. And that we are one of the leaders in North-America here.

Greg MacDonald - Macquarie Securities

And I guess or maybe it’s just that everybody out west is richer than us poor people in the east. Okay, I appreciate your answers. Thanks guys.

Bradley Shaw

Well, the tax rate is lower…

Greg MacDonald - Macquarie Securities

That's for sure, don't I know it.

Operator

Thank you. Our next question comes from Matthew Niknam with Goldman Sachs. Please go ahead.

Matthew Niknam - Goldman Sachs

Hey guys. Thanks for taking the question. A couple on commercial if I could. One if you can give us an update on the absolute revenue contribution from commercial in the quarter and whether you saw any competitive responses from your telco peers there? And then well broadly any color you can give on what percentage share of the commercial market you estimate you have in your footprint and where that can go overtime? Thanks.

Steve Wilson

Well I will start just with the number there. We're not breaking our business right now. As a separate number we've said its $300 million last year and we expect some 20% growth this year and we're tracking well to that number and as I said Envision acquisition is growing very well for us with the 560 buildings that we acquired, 46 of the top 100 customers in Calgary and we're being able to leverage that to sell other services and business. But we don't have a specific number right now.

Bradley Shaw

Yeah and I don't know that we want to size the prize in terms of total market share I mean obviously it’s pretty clear the size of the Western Canadian market, we play in a sub section of that. We've been very successful in small and are continuing to focus on small. And we're increasingly having an awful lot of success in media. And so you really need to look at the sizes of those marketplaces to get a sense of the opportunities. There is no question whether there is lots of room for us in market position.

And just building on what Steve said about the Envision acquisition things have gone really well for us with Envision. It certainly has significantly strengthened our relationship in the oil and gas vertical. We’ve been selling both voice and data. Shaw service is very well within the Envision base and the team that have come over subsequent to a number of deals with customers that we haven’t previously had. So a very positive add to the business.

Matthew Niknam - Goldman Sachs

Just anything on the competitive responses from telco peers?

Bradley Shaw

We continue to have a very competitive environment in small. I think in the medium space you are seeing more differentiation.

Matthew Niknam - Goldman Sachs

Okay, thanks.

Operator

Thank you. Our next question comes from Maher Yaghi with Desjardins. Please go ahead.

Maher Yaghi – Desjardins Securities

Thank you for taking my question. And please note these are for both your tax rate in Alberta, I live in Montreal so. I am going to cry so in here. So on the subscriber front in video, and you talked about potential cost cutting happening in some of your subscriber base. Is that really, you believe the reason why we are seeing this year-on-year increase in net addition in net losses in the subscriber numbers is that the main reason?

Steve Wilson

I am not sure I see where you are going. I understand you are using a comp in Q1 of F’13 in 24, Q2 F’13 was 29.4, we were 27 in Q3 we were 29.5 in Q4 and we were 29.6 in Q1. So I don’t really see a shift in trend in the loss.

Bradley Shaw

Yeah so it does a lot of shift in trend. The sort of studies that we’ve seen is that we are still in the early days of core cutting and it's still having a very marginal impact. So we’ve seen numbers like 1.5% to 3.5% per year. If you take that across our base of video subscribers that’s about 50,000 that you would see as a result of core cutting and then the rest is potentially more of a competitive loss.

Maher Yaghi – Desjardins Securities

That’s very helpful, that make sense. And the reason I was asking that question is I am trying to assess may be we are in the turning point and in terms of like one we would get smaller losses on the TV side and that’s what I was going for, and in terms of the high speed net additions can you share with us how many small business lines were connected during the quarter? I assume you are starting to see quite a fair bit more of that business coming your way you’ve been focusing on this for a while now?

And can you talk a little bit about the prospects for help coming from small and medium size businesses on that front?

Bradley Shaw

We would have been a primary -- we’d had our primary focus on selling Internet to small business for five years at this point. And we’ve had kind of an even quarter in Q1 in terms of what our Internet adds were. And so is there a continued opportunity there, absolutely, there is continued opportunity there but I don’t think you’ll necessarily see a shift. And clearly if you look at if you are trying to get at this lid of the Internet business it's clear that we had a small single digit residential loss in the quarter make some probably scope back into that what the numbers look like?

Paul Robertson

But again as we’ve said before you need to look at overall larger use and not just focus on video too much, because you have to remember that there is an opportunity with a very differentiated service from a speed point of view and with Wi-Fi to be able to lean with an Internet product and that’s the potential shift in focus.

So as millennials core cut, there also the people who are looking for the very best Internet service that they can get both in and out of the house. So that’s a balancing factor here that again, as we continue to look at the evolution of this business going forward it's moving from video to the broadband in the home and outside home.

Maher Yaghi – Desjardins Securities

Thank you.

Bradley Shaw

Thank you, operator. Thanks everyone. I will see you next call.

Operator

Thank you.

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Source: Shaw Communications' CEO Discusses F1Q 2014 Results - Earnings Call Transcript

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