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Shaw Communications revenue and profits fall as it awaits approval to merge with Rogers

A Shaw Communications sign at the company’s headquarters in Calgary, January 14, 2015.Jeff McIntosh/The Canadian Press

Shaw Communications Inc. SJR-AX reported lower revenue and profit in the second quarter as it awaits approval from two more regulators for its $26 billion combination with Rogers Communications Inc. RCI- AT

Shaw earned $1.36 billion in revenue for the three months ended Feb. 28, down 2% from a year ago, when it brought in $1.39 billion.

Its net income for the quarter was $196 million, down 9.7% from $217 million in the same period last year. Earnings were 39 cents per diluted share, versus 43 cents.

Shaw added 8,632 postpaid wireless subscribers during the quarter – significantly less than the 75,069 it added during the same quarter last year.

The company attributed the year-over-year decline to increased competition over the holiday season, a limited supply of key wireless devices and a change in its internet and wireless service bundle from Shaw Mobile.

Edward Jones analyst Dave Heger called the results disappointing and noted that Shaw may have pulled its promotional wireless business over the holidays.

“If you look across the industry, that’s when everyone sees their greatest growth — the best subscriber additions are usually around the holiday season,” Heger said. in an interview.

He added that Telus Corp., BCE Inc.’s Bell Canada and Rogers Communications all reported strong wireless customer additions over the holidays, indicating that Shaw’s Freedom Mobile lost market share to its competitors.

“They may just be eager to get [the Rogers deal] shut down and maybe took their eyes off the ball to some degree,” Heger said, adding that the takeover is still “not a done deal.”

“They’re going to have to find a buyer for [Freedom] to close the deal, so [these results] could cause a potential buyer to back off and recalculate what this business might be worth,” Heger said.

Shaw also added 8,260 prepaid mobile phone customers, up from 7,228 in the same quarter last year. Postpaid subscribers are those who are billed at the end of the month for the services they have used, as opposed to prepaid customers, who pay upfront for wireless services.

The company has also reduced spending on its wireless network while increasing its investment in the wired network. Shaw spent $30 million on its wireless network in the quarter, down 57.7% from a year ago, when it spent $71 million. Its wireline capital expenditures were $219 million, up 22.3% from $179 million.

Last month, the Canadian Radio-television and Telecommunications Commission approved the transfer of broadcasting services from Shaw to Rogers. The takeover still requires approval from the Competition Bureau and Innovation, Science and Economic Development Canada.

Innovation Minister Francois-Philippe Champagne said he would not allow Rogers to acquire all of Shaw’s wireless licenses. It would run counter to Ottawa’s desire to preserve competition in the wireless sector, Champagne said in a statement in March.

Brad Shaw, Shaw’s chief executive, called the CRTC’s approval a “critical milestone” and said his company continues to work with Rogers to secure the remaining regulatory approvals. Rogers and Shaw expect the deal to close in the first half of this year.

“Our team continues to execute on our strategic business priorities of driving profitable growth while continuing to invest in the strength and breadth of our networks. It is this strong and strategic foundation that, combined with Rogers, will bring new and better technologies to more Canadians,” Shaw said in a statement.

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