Pick and pay could hit Shaw the hardest, says Canaccord’s Ghose

Canaccord analyst Dvai Ghose points out that Shaw is at the top of the heap in terms of exposure to cable and satellite TV services, deriving 48% of its revenue from this source. By comparison, Rogers derives just 14% of its revenue from cable and satellite, while Bell comes in at just 11%. Canaccord analyst Dvai Ghose says the Canadian government’s expected decision to mandate “pick and pay” services probably won’t be a big blow to Canada’s telcos, but Shaw’s (TSX:SJR.B) overall exposure to cable and satellite means that company could be negatively impacted.

In today’s throne speech, which is to be delivered at 2pm EST, the Conservative government is expected to focus on consumer issues like the capping of roaming fees for cellular users and the unbundling of cable TV channels to allow more choice for subscribers.

Ghose points out that Shaw is at the top of the heap in terms of exposure to cable and satellite TV services, deriving 48% of its revenue from this source. By comparison, Rogers derives just 14% of its revenue from cable and satellite, while Bell comes in at just 11%.

The Canaccord analyst estimates that 8% of Shaw’s fiscal 2013 revenue came from specialty channels, compared to 5% for the likes of Rogers, Bell and Quebecor. He thinks there will be a negative impact for less popular specialty channels that are currently bundled with more popular ones.

In Quebec, notes Ghose, Bell and Videotron will see little impact because they have been offering a la carte choices for several years, and the majority of their customers are already subscribing to such services. He says it is curious that many in the industry argue that a la carte will not have much of an impact because the price per channel tends to rise under such plans. If this is true, wonders Ghose, why haven’t the incumbents adopted pick and pay already?

Ghose says he is taking a wait-and-see approach to the pick and pay situation. In a research update to clients Monday, he maintained his BUY ratings on Telus and Rogers and his SELL rating on Shaw. He believes the market may be overstating the wireless regulatory risk and understating the regulatory risk in cable.

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About The Author / Nick Waddell

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

Comment

Don Barthel says:

October 17, 2013 at 10:19 am

We subscribe to Shaw internet and telephone services but not TV. TV is just not cost effective for us. We watch mostly movies and TV shows from DVD (bought or borrowed from friends or from the library). If I can pick and choose channels I might just re-subscribe to TV. Live hockey, British drama, and the occasional newscast is all I want.
marpy says:

October 17, 2013 at 12:58 pm

What is really needed if the consumer is to see any real benefit is more competition. In most areas if you want a package that includes phone, tv and internet you get to choose between 2 of the big 3 or 4 players and that is like no choice at all.