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Report on Business ‘The competition is learning to follow our lead:’ Shaw’s Freedom Mobile adds 62,000 new wireless customers in third quarter

Shaw Communications Inc.'s Freedom Mobile is claiming credit for recent moves by Canada’s national wireless carriers to introduce new data plans with no overage fees and says it will still be able to attract new subscribers despite the increased competition.

The Calgary-based company said Thursday that its regional carrier Freedom – which operates in urban centres in Ontario, British Columbia and Alberta – added 62,000 new wireless customers in the company’s fiscal third quarter, the three months ended May 31. That’s up from 47,000 in the same period last year and the company said average monthly bills increased by 6.2 per cent to $42.30 while customer turnover was down.

Those numbers come two weeks after Rogers Communications Inc. overhauled its wireless pricing, announcing a range of new plans with larger data buckets and no fees for going over monthly allotments (once customers hit their limits, browsing speeds are dramatically throttled down instead).

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Canada’s largest carrier called the plans “unlimited,” nodding to customer demand for more data without expensive overage charges, something cellphone companies in the United States have offered for the past several years. Rivals BCE Inc. and Telus Corp. quickly followed with similar promotional deals of their own and analysts expect they will follow Rogers’s lead and make those plans permanent.

Shaw chief executive Brad Shaw, speaking on a conference call Thursday after the company announced its quarterly earnings, said that Freedom Mobile’s own “Big Gig” data plans “forced” the Big Three to respond by “launching their own, more expensive versions.”

Freedom launched plans 18 months ago that offer large buckets of high-speed data with speeds slowed down after customers hit monthly limits. Since that time, the Big Three have responded with frequent temporary promotions, leading to larger data plans and fewer overage fees for customers. But analysts say the recent moves by the national carriers are more significant and represent a shift in how the Canadian industry is approaching wireless pricing.

For roughly comparable packages of 10 gigabytes a month of data and unlimited calling and texting, prices at the Big Three start at $75, while Freedom charges $65. However, Freedom’s network quality still lags the national carriers and customers who go outside Freedom’s network coverage area within Canada ​will see speeds slowed down after 1 GB of data use.

Despite those disadvantages, Mr. Shaw said he expects momentum to continue at Freedom, pointing out that the majority of subscribers at the Big Three would still have to move up to the more expensive monthly rate of $75 to escape overage charges on their current plans.

In a report last week, TD Securities analyst Vince Valentini estimated that 67 per cent of Rogers wireless subscribers pay an average of $67.15 per month, not including taxes or charges for the repayment of smartphone subsidies the company offers up front.

“We have worked hard to reset Canadians’ expectations of their wireless providers and the competition is learning to follow our lead,” Mr. Shaw said. “And while the recent pricing moves have attracted lot of attention, they have yet to have any meaningful impact on our customer acquisition initiatives, and we remain confident that the value of our Big Gig plans continue to resonate with Canadians.”

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Rogers said it made the pricing change to prepare for 5G networks, which Canadian carriers are expected to start rolling out in late 2021 or 2022. The new technology will offer faster speeds and less lag time and support much more data usage. Mr. Valentini said the new pricing spurred by Rogers could help get customers used to using more LTE (4G) data and increase “willingness to adopt 5G add-ons” such as speed boosts.

The Canadian Radio-television and Telecommunications Commission (CRTC) is also conducting a review of competition in the wireless industry, with a public hearing planned for January, and analysts have noted that the pricing changes could paint the Big Three in a more favourable light in front of the federal regulator.

The CRTC is considering new rules that would force the national carriers to sell network airtime to new competitors that do not build their own infrastructure, and which then market and sell wireless service to retail customers. Like the Big Three, Shaw is also opposed to regulations to enable such providers, known as mobile virtual network operators (MVNOs), saying they would go after the same lower end of the market as regional players like itself, Quebecor Inc.’s Vidéotron and Eastlink Inc. in Atlantic Canada.

Analysts on Thursday were positive on Shaw’s wireless results but noted that the company’s much larger cable division continues to struggle with television customer losses. Shaw added about 7,000 internet customers in the third quarter but lost about 21,000 TV subscribers.

Revenue at the cable division was up 1 per cent at $1.1-billion while operating income before restructuring costs and amortization decreased by 2.1 per cent to $475-million.

The company said that decline was due in part to a one-time payment of $15-million for a “multiyear agreement with a large IP [intellectual property] licensing company.” Shaw representatives declined to further explain the agreement but executives said on the conference call it is not related to the company’s TV platform licensing agreement with Comcast Corp.

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Wireless revenue increased by 11.1 per cent to $251-million and operating income at the division was up 3.8 per cent to $55-million.

Shaw said overall revenue was up 3 per cent to $1.32-billion. It reported profit of $229-million, or 44 cents a share, up from a loss of $99-million, or 20 cents, in the same period last year. The company said the favourable comparison was largely because of a large writedown it recorded in 2018 on its investment in Corus Entertainment Inc. Shaw sold its Corus shares in May for $538-million, helping to offset the $492-million it spent on wireless airwaves in a government spectrum auction earlier this year.

Editor’s note: An earlier version of this story incorrectly said Freedom Mobile customers face extra charges when roaming outside the carrier's network in Canada. In fact, browsing speeds are slowed down after 1 GB of roaming, but the company does not charge additional fees.

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