Shaw Communications (TSX:SJR.B) is making its long-anticipated foray into the wireless business by picking up Wind Mobile for $1.6 billion.
The Calgary-based telecommunications company says it will acquire the country's fourth-largest mobile operator by subscribers pending a number of regulatory approvals, including the Competition Bureau and the Ministry of Innovation, Science & Economic Development.
Shaw expects the transaction to close in the third quarter of 2016.
The purchase puts Shaw in line with competitors BCE (TSX:BCE), Rogers and Telus in offering the entire slate of popular bundled services — wireless, television, home phone, and Internet.
"We believe that our customers want us to be their network and experience company, and in order to do that we needed to make a wireless play," said Shaw chief operating officer Jay Mehr.
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).
"The aspirations were always there in 2011 — the economics certainly weren't," Mehr said.
Wind Mobile, which is based in Toronto, has 940,000 subscribers across Ontario, British Columbia and Alberta.
Since 2011, the federal government and the CRTC have made several changes to the rules for wireless competition which lowered roaming fees for carriers and customers.
Mehr said Shaw re-examined its wireless strategy at the beginning of this year and found that it made sense to buy an established player. He said Shaw has no plans to shift from Wind Mobile's low-cost packages or hike prices.
"This is a winning strategy that's been created, and our plan is to continue on that winning strategy," he said.
The company plans to compete hard against the larger carriers, Mehr said, and Shaw's resources will give Wind Mobile the ability to build out its network.
Wind Mobile CEO Alek Krstajic and his executive team plan to stay with the company.
Wind Mobile was formed exactly six years ago on Wednesday as part of group of new entrants in Canada's wireless industry, a move encouraged by the federal Conservative government to stoke competition.
The company ran into financial problems and has had difficulty raising money for its capital investments, but a change in its ownership structure last year cleared the way for it to raise funds.
Last week, Wind Mobile said it had secured financing of $425 million from a syndicate of major Canadian banks to upgrade from 3G to a higher-speed LTE network, which would give it more capacity for the growing popularity of streaming video and music on mobile phones.
Mehr said Shaw still plans to roll out LTE across Wind Mobile's network by the end of 2017.
SHAW CEO: TIME RIGHT TO MOVE INTO MOBILE WITH $1.6 BILLION WIND MOBILE PURCHASE
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 chief executive Brad 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.
