Telecommunications giant Shaw Communications Inc. is facing stiffer competition than ever before on its home turf in western Canada, particularly from Telus Corp., an analyst said in a third-quarter results preview on Friday.
Dvai Ghose, analyst with Canaccord Genuity, said Telus’s IPTV homedigital TV service is gaining traction against Shaw by offeringservices that are superior in many ways.
“We are beginning to see a strong acceleration in Telus’s IPTVsubscriber additions due to its launch of Microsoft Mediaroom andgrowth in Telus’s addressable IPTV footprint,” he said in a noteFriday. “Mediaroom seems to offer several advantages over cableincluding one PVR (personal video recorder) for up to six TVs, betterhard drive capacity, superior anti-pixelation software, and a muchbetter interactive guide.”
IPTV also has a more efficient bandwidth usage system and video encoders.
“For the first time, cable seems to be facing legacy challenges,” Mr. Ghose said.
He meanwhile expects Shaw to post a 10% rise in revenue to$949-million and EPS of 33¢, compared with consensus of 34¢. This isalso a 10% rise compared with 30¢ posted in the third quarter of 2009.
Mr. Ghose warned Shaw was unlikely to pursue dividend increases orbuybacks, with revenue growth “set to decelerate due to competition andmaturation” and low free cash flow.
Free cash flow forecasts have been cut in half to $68-millioncompared with $154-million a year ago, blamed on higher taxes due toexpired tax shelters and additional wireless capital spending in thequarter.
Mr. Ghose maintains a Hold rating for Shaw with a $19 target price.
Eric Lam