Shaw has cancelled plans to build a cell network in favour for Wi-fi.
The company came to the decision as the Canadian wireless market, formerly dominated by companies like Rogers and Telus, has opened to a number of new upstarts like Wind Mobile and Mobilicity, lowering potential profit margins as companies lower prices to compete.
With Data use increasing with the popularity of smartphones, tablets and other such devices, Shaw’s plan is to use its already extensive network of cables to extend wi-fi coverage to heavily trafficked areas, and offering a data plan to customers.
Shaw’s decision saw mixed reactions.
Iain Grant a telecommunications consultants for Seaboard Group, sees potential in for Shaw’s Wi-Fi plan. The speed of the connection would be faster than that offered by cell companies, allowing customers to move to a smaller cellular plans with Shaw providing data coverage.
Others, like Dvai Ghose, an analyst for Canaccord Genuity, don’t believe the change could benefit the company.
The change keeps the company from spending $1 billion on the development of a network but Ghose doesn’t see money spent on Wi-Fi generating revenue, pointing to companies such as Cablevision who are using this strategy.
But Bissonnette maintains that the direction allows Shaw to better utilize the systems Shaw has in place, while providing shareholders a solid revenue.
The costs of further upgrading and expanding a cell network would have further increased the initial one billion dollar build and would deplete profit margins.
Wi-Fi network can be based from buildings or lamp posts while a cell networks use towers, which require approvals.
Shaw spent around $200 million to acquire cell spectrum at auction in 2008, and had invested $180 million before cancelling their cell network program earlier this year, but CEO Brad Shaw told analysts that about $50 million of the investment will be recovered.
They will hold onto the spectrum they own, which he believes will increase in value.
Brad Shaw also didn’t rule out trying to compete in the 2012 spectrum auction.