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Copyright 2003 Toronto Star Newspapers, Ltd.

Toronto Star

April 10, 2003 Thursday Ontario Edition

Shaw Communications Inc., Canada's Number 2 cable company, has reported a smaller second-quarter loss as higher prices and strong Internet subscriber growth boosted sales by almost 10 percent.

The Calgary-based firm, which also operates the country's second-largest satellite television service, generated free cash flow in the quarter, a key measure of financial health, Shaw said yesterday.

"The results were generally positive," said Greg MacDonald, an analyst with National Bank Financial. "The revenue was in line and the EBITDA (earnings before interest, taxation, depreciation and amortization) was better than expected. High-speed data (Internet service) was the surprise. Net subscriber additions of 41,717 is a very good number."

Shaw said its loss narrowed to $19.7 million, or 13 cents a share, for the quarter ended February 28, from $78 million, or 38 cents a share, in the year-earlier period. Revenue rose to $521.4 million from $474.9 million.

Three analysts polled by Multex had expected, on average, a loss of 10 cents a share, while three analysts surveyed by Thomson First Call had expected, on average, a loss of 9 cents.

But analysts said the bottom-line bad news was partly offset by news the company generated free cash flow of about $10 million in the quarter. Free cash flow is the money a company generates from operations after deducting capital spending.

Shaw's cable and Internet unit generated $43.7 million of free cash flow, but cash flow was still negative at the satellite division.

"The company was free-cash-flow positive on a consolidated basis for the first time in I don't know how many years," MacDonald said. "That's noteworthy."

Shaw executives told analysts during a conference call the cable division was on track to beat a previous target of $105 million of free cash flow in fiscal 2003 and guidance may be changed next quarter.

"We're way ahead on that category," chief financial officer Ron Rogers told analysts. "There's a number of things that have come into play there. We feel our operating income is doing exceedingly well ... The customer growth is better than we anticipated. There's a lot of good things all coming together for us, so I guess we would probably end up exceeding that $105 million."

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