Cable firm cuts jobs, raises rates, sells units

Tue, 03/26/2002 - 7:00pm
David Paddon, James Stevenson

Copyright 2002 Toronto Star Newspapers, Ltd.

Toronto Star…03/27/2002

From LexisNexis

Shaw Communications Inc. is cutting 400 jobs, selling its U.S. cable systems and raising monthly charges for nearly 2 million Canadian subscribers as the country's second-largest cable TV operator grapples with a $74.4 million quarterly loss.

Most of the jobs — about 6 percent of about 7,000 positions at the company — have been associated with capital spending programs and various promotions that will no longer be continued, Shaw said yesterday.

All of the company's cable systems have been upgraded to handle digital service, for instance, and 96 percent can provide two-way service — two of the areas where the company expects to increase revenues.

"Shaw has taken immediate action and restructured its operations to reduce its costs, increase prices and at the same time maintain strong growth," the company said in a release.

"The effect of these actions will be realized beginning in the third quarter."

In its financial report, Shaw reported a loss of $74.4 million or 36 cents a share for the three months ended Feb. 28, its fiscal second quarter.

That compared with a profit of $189.1 million or 83 cents a share for the quarter last year. Quarterly revenues rose to $256.7 million from $205.1 million.

In a move to increase revenues, Shaw said it will also increase basic fees to its 2.1 million cable subscribers and Internet services customers by $3 a month, effective May 1. This move will affect all cable subscribers except for about 200,000 who subscribe to basic service only.

The company also will apply to the CRTC for approval to deregulate its basic services, "which is in line with satellite companies who do not have basic rate regulation."

The Calgary company said it will take a $4.6 million charge on its books to cover the severance costs associated with the layoffs.

"The capacity of the plant and networks is now able to sustain strong future growth without further major capital expenditures," the company said.

"Therefore, Shaw is in a strong position to grow its business and at the same time begin to generate free cash flow," it said.

The company also said its U.S. cable systems are no longer strategic and will be sold. The sale of the U.S. cable systems, which have about 75,000 subscribers, is expected to be completed by the end of August.

The money raised from the sale will be used to pay down Shaw's $3.4 billion debt.

One analyst said the retreat from the United States is yet "another Canadian company that can't compete" south of the border.

"They're doing just like BCE — retrenching back (from) the tariff barriers or the barriers to competition," said Eamon Hoey, a senior partner with telecommunications consultants Hoey Associates.

"The U.S. is a tough environment to compete in. It's a lot easier to compete in Canada where you have a virtual monopoly over a huge territory."

Shaw is Canada's second biggest cable TV operator after Toronto-based Rogers Communications Inc. Through asset swaps with Rogers and other acquisitions, Shaw has become the dominant player in Western Canada. The company also owns Star Choice satellite TV company and other assets.

Shaw's class B shares rose 31 cents to close at $29.35 in trading on the Toronto Stock Exchange yesterday.


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