TORONTO — Although the proposed sale of Shaw Media to Corus Entertainment was top of mind for financial analysts Thursday afternoon, Wind Mobile and FreeRange TV was a big deal, too
Calling the Shaw Media sale to Corus “a significant milestone for both companies,” Jay Mehr, EVP and COO of Shaw Communications, said during the Q1 conference call with financial analysts that the transaction along with Shaw’s acquisition of Wind will position Shaw “as a leading pure-play connectivity company with a strong growth profile.” The Wind wireless business complements Shaw’s existing Business Network Services and Business Infrastructure Services segments, Mehr said. (CEO Brad Shaw missed the call and the company’s AGM Thursday with a bad case of the flu.)
The $2.65 billion sale of Shaw Media will provide Shaw Communications with about $1.85 billion in cash and roughly $800 million of Corus Class B shares, said Vito Culmone, Shaw’s CFO, during the call. Shaw expects to use the cash to fund the $1.6 billion Wind acquisition.
If both transactions receive the required approvals, they are expected to close around the same time, at the end of May. In the event the two closing dates vary, Culmone said Shaw has a $1.7 billion bridge facility to draw upon if necessary to complete the Wind purchase.
Mehr added that although these two deals have landed on top of each other, they were preceded by 12 to 15 months of detailed, careful consideration. “I think you can over-read the symmetrical nature of the cash (made available by the sale of Shaw Media that can be used to buy Wind) and put them in causal relationships with each other. We were really trying to find the best way forward,” Mehr said.
“Since our acquisition of CanWest in 2010, the media regulatory environment has really evolved or reduced the strategic benefits of vertical integration between BDUs and content providers.” – Jay Mehr, Shaw Communications
So, does this mean the benefits of vertical integration have gone away over the years, asked one analyst? Mehr responded: “Since our acquisition of Canwest in 2010, the media regulatory environment has really evolved or reduced the strategic benefits of vertical integration between BDUs and content providers. At the same time, we believe the regulatory protections are in place, and certainly with our strong relationship with Corus, we think we’re in a position to ensure there are no negative strategic consequences that will result from the sale of Shaw Media to Corus.”
He said instead of being vertically integrated, Shaw Communications now enjoys a vertical relationship with Corus, adding that Shaw has concluded expansive, multi-year carriage agreements with both Shaw Media and Corus services that codify those arrangements for the years ahead. Also, the Shaw family still controls both companies.
Shaw Media president Barb Williams was also on the call to address questions about how the merger with Corus would affect the shomi joint venture between it and Rogers. (It was announced Williams will be given a senior leadership position at Corus once the sale of Shaw Media is completed.)
“What we have agreed going forward is that Corus will continue to support, and is obligated to continue to support, the access of those SVOD (subscription video-on-demand) rights for shomi. So there should be no interruption at all in the flow of programming via Corus and on into shomi, just the way it did when Shaw Media was owned by Shaw,” Williams said.
Trevor English, Shaw Communications senior vice-president of corporate development and business planning, added there are a number of commercial agreements between the parent company and Shaw Media that will continue to stay in place after the sale is completed, and shomi is one of them.
When asked how carriage negotiations with BDUs in general will be affected by the new unbundled environment that will emerge shortly with pick-and-pay, Williams said the existing carriage agreements Shaw Media has with other BDUs will be negotiated as they come up for renewal.
“As far as unbundling and Let’s Talk TV is concerned, I think we as broadcasters really believe in our channels, believe in our brands, believe in strong carriage and strong viewership going forward. And we’re not planning at the moment for significant change from that point of view,” Williams said. “But clearly as the year unfolds and we see what the impacts are, that may affect future negotiations with our other carriers,” she said. “In some ways, it’s going to have to sort itself out over this next year.”
During the conference call, Mehr was asked about Shaw’s new FreeRange TV service, unveiled during CES in Las Vegas last week, which will allow Shaw TV customers to view their content on mobile devices at no additional subscription cost. (FreeRange TV uses Comcast’s cloud-based X1 platform to provide Shaw customers with mobile access to video content.) The analyst wanted to know if anything prevents Shaw from offering FreeRange TV as a standalone subscription service, similar to what Sling TV provides.
“FreeRange TV itself is a product and a consumer experience that by its fundamental design is an extension of your video subscription in the home,” Mehr said. “Where you’re correctly heading though is, while that’s the application and experience, the back office that has been built to support FreeRange is the single IP, all in the cloud, video back office that will support all of our IP cloud-based video applications and executions going forward.”
Meaning, there’s nothing technical to prevent Shaw from using that same IP-based back office infrastructure to provide video to wireless data customers or some other application, Mehr said.
“What does need to be worked out, and there aren’t any immediate plans in this regard…is just the go-to-market considerations, what it means competitively, and then also the rights issues, because the rights that are on FreeRange TV have been acquired, sometimes at an additional cost, as an extension to the home subscription. So there are rights and business stuff that would need to be sorted out, but this is Shaw’s IP cloud-based video delivery infrastructure that we will be using for all of our applications going forward.”
