SHAW COMMUNICATIONS INC. III. Operating Performance Digital TV - - PowerPoint PPT Presentation

INVESTOR PRESENTATION | MAY 2012 |

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INVESTOR PRESENTATION

I. Investor Highlights II. Strategic Focus III. Operating Performance

• Digital TV
• Internet
• Phone
• Shaw Direct

IV. Review of F2011 Financial Results & F2012 Guidance V. Shaw Media VI. Leverage Review

• VII. Conclusion

TABLE OF CONTENTS

SHAW COMMUNICATIONS INC. INVESTOR UPDATE

MAY 2012

INVESTOR PRESENTATION | MAY 2012 |

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INVESTOR PRESENTATION

I. Investor Highlights

• II. Update on Shaw’s Strategic Initiatives
• III. Financial Information
• IV. Conclusion

TABLE OF CONTENTS

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INVESTOR PRESENTATION

Shaw Communications Inc. is a diversified communications and media company, providing consumers with broadband cable television, High-Speed Internet, Home Phone, telecommunications services, satellite direct-to-home services and engaging programming content. Shaw serves almost 3.4 million customers, through a reliable and extensive fibre network. Shaw Media operates one of the largest conventional television networks in Canada, Global Television, and 18 specialty networks including HGTV Canada, Food Network Canada, History Television and Showcase.

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INVESTOR PRESENTATION

• Shaw’s portfolio of assets cements our status as one of the leading entertainment and communications

companies in Canada and as such, we believe that we are well positioned in a highly competitive environment

• We are the largest video distributor in Canada and we continue to have some of the most profitable

cable operations in North America

• Including Shaw Direct, we distribute video services to almost 3.4 million customers which

represents approximately 30% of the Canadian Pay-TV market

• Shaw Media operates Global Television, reaching over 98% of Canadians, and 18 of the country’s

most popular specialty channels

• Ownership of content provides diversification benefits, helps protect profitability of video

services (i.e. hedge against programming cost inflation) and enables the creation of innovative services for our customers (i.e. online and VOD opportunities, mobile application etc.)

• Competition and convergence within our core cable business has intensified over recent years
• However, the current “duopoly” structure within the Canadian communications industry remains

attractive for companies and investors

• Shaw has a proven track record of prudently managing capital on behalf of our stakeholders
• I. INVESTOR HIGHLIGHTS

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INVESTOR PRESENTATION

• Shaw has a substantial subscriber base in some of the most attractive economies in North America
• The Western Canadian economy continues to be strong and growing
• I. INVESTOR HIGHLIGHTS

2,257,061 1,906,597 1,925,518 1,283,083 910,688 500,000 1,000,000 1,500,000 2,000,000 2,500,000

Subscriber Base as @ February 29, 2012

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INVESTOR PRESENTATION

• Our FCF profile remains robust and we have returned substantial capital to shareholders via dividends
• In conjunction with our Q1/12 earnings release we announced a 5% increase to our dividend
• At our current dividend rate ($0.97/share), Shaw shares yield 4.8% (based on a $20.00

share price)

• Since 2007, Shaw has returned almost $2 billion to shareholders through dividends and share

repurchases

• I. INVESTOR HIGHLIGHTS

$201 $304 $352 $372 $391 $415 $0.16 $0.71 $0.82 $0.88 $0.92 $0.97

$0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $0 $100 $200 $300 $400 $500 2007A 2008A 2009A 2010A 2011A 2012E

Effective Annual Dividend Rate per Share Dividend Payments to Shareholders ($MM)

Dividend Payments

Total Annual Dividend Payments Effective Dividend/Class B Share at end of fiscal year

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INVESTOR PRESENTATION

Cable Overview:

• We continue to make progress with respect to our technology initiatives, including our Wi-Fi and

Digital Network Upgrade (“DNU”) projects, and we are excited about some new product launches (i.e. Motorola DreamGallery guide)

• We believe these initiatives will support and increase the value proposition of our existing

products and services

• Specifically we continue to focus on Broadband leadership and we believe that pricing

power within this product remains strong due to the differentiated experience Shaw’s Internet service provides

• Shaw EXO, and the rebranding of our network, will help position and maintain Shaw’s

technology superiority in the consumer market

• The issues and disruptions to our customer care centers are largely behind us and we have begun

delivering an experience that Shaw customers expect

• Shaw’s reputation of customer service has always been one of our key competitive advantages
• Delivering an exceptional customer experience will be the foundation to our future success
• II. UPDATE ON SHAW'S STRATEGIC INITIATIVES

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INVESTOR PRESENTATION

Cable Overview:

• The competitive environment has changed significantly over the last several years, as Telco’s continue to

build out their IPTV addressable market and technology trends & consumer demands continue to evolve

• We face a highly competitive environment in North America with respect to IPTV overlap
• TELUS has rolled out their Optik TV product across our major Western Canadian markets

(i.e. Vancouver, Calgary, Edmonton and Victoria) utilizing fibre-to-the-node (“FTTN”) technologies while MTS has had a competing TV service in Winnipeg, and the surrounding area, since 2003

• However, while facing significant competition we continued to grow our cable business,

and in fact F2011 was the first year we actually lost cable subscribers

• II. UPDATE ON SHAW'S STRATEGIC INITIATIVES

$- $500.0 $1,000.0 $1,500.0 $2,000.0 $2,500.0 $3,000.0 $3,500.0 FY09 FY10 FY11 Cdn $ million's

Cable Revenue & EBITDA (2009-2011)

Revenue EBITDA (100,000) (50,000) 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 FY09 FY10 FY11 Net Additions

Subscribers - Net Additions (2009-2011)

Basic Digital TV Phone Internet

10.8% 5.6% 6.2%

% Represents annual revenue & EBITDA growth respectively Note: F10 excludes impact of CRTC Part II Fee

11.3% 10.8% 10.1%

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INVESTOR PRESENTATION

Cable Overview:

• Convergence of offerings has lead to aggressive price competition as providers compete for customers

with the goal of “owning-the-home”

• We now have over 70% of our customers bundled in a triple or double-play package
• Competition is not just within our own backyard as consumers are embracing innovation/technology (i.e.

Netflix and similar OTT-like services) and demanding greater flexibility and value with respect to their telecommunication and entertainment services

• Creative bundling packages have been a tool that we have utilized to meet the demands of our

customers

• TELUS continues to focus on market share objectives and has employed a typical new entrant approach

through free and subsidized equipment (i.e. HDPVR/tablet/laptop offers) and aggressive promotional pricing offers

• TELUS launched their Optik TV product, utilizing the Microsoft Media platform, in 2009 and they now

have over 500,000 TV customers

• This represents a 22% market share, based on their addressable market of 2.3 million households

(source: Telus recent Q4 conference call)

• TELUS wireline profitability has been impacted, but the market continues to overlook financial

dilution of their TV strategy as TELUS’ wireless business continues to generate significant profits to fund IPTV losses

• II. UPDATE ON SHAW'S STRATEGIC INITIATIVES

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INVESTOR PRESENTATION

Cable Overview:

• Recent quarterly subscriber results have been pressured and core RGUs slowed in Q1/12 (note:

core RGUs = the summation of basic, Internet and phone customer additions)

• We believe this is attributable to a number of factors, including:
• Western Pay TV market is highly penetrated – however modest growth opportunities still

exist as housing market remains positive

• Customer service disruptions that we encountered late in the fall
• TELUS promotional tactics (note: mainly free hardware offers) continue to have an

impact

• II. UPDATE ON SHAW'S STRATEGIC INITIATIVES

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INVESTOR PRESENTATION

Cable Overview:

• At the end of 2011 we had begun to put in place the necessary operational resources and strategic investments

required to address the customer service issues

• However, the lingering effects of the customer service disruptions, combined with the intense competitive

environment, resulted in a loss of momentum within our cable business

• In December, we made a strategic decision to modify our tactics in order to change the momentum and environment,

as we believe our subscriber base represents the long-term franchise value of our Company

• We launched the Visa Gift card program and in January we initiated a variety of new packages and offers (i.e.

Simple Bundles)

• These strategies were successful, as we added over 60K core RGU’s in Q2 compared to 11K in Q1 F12 and 30K a

year ago

• Our basic subscriber loss moderated to less than 10K in Q2 compared to a loss of 23K in Q1 F12 and a loss of

almost 14K in Q2 F11

• II. UPDATE ON SHAW'S STRATEGIC INITIATIVES

(9,946) 18,681 46,564 54,407 1,274 (22,768) 10,685 59,566 22,969 531 (13,662) 10,772 35,403 32,512 2,176

(40,000) (20,000) 20,000 40,000 60,000 80,000

Basic Internet Digital TV Phone Shaw Direct

Net Additions

Net Additions Comparison YoY & QoQ

Q2/12 Q1/12 Q2/11 (40,000) (20,000) 20,000 40,000 60,000 80,000

Q2/12 Q1/12 Q2/11

Net Additions

Core RGU Trend

Basic Internet Phone 30K 11K 63K

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INVESTOR PRESENTATION

Cable Overview:

• However, this approach to the competitive environment, including costs associated with staffing and

marketing expenditures over the last quarter, caused financial results to come under pressure

• Q2 cable EBITDA margin compressed by 380 bps to 43.8% compared to a Q1 cable margin of

47.6%

• However, some of the costs in the quarter were one-time in nature and we expect our cable cost

structure to moderate going forward

• We tried many things in a short period of time; however it is clear from our financial results that our

subscriber acquisition activities were at a greater cost than what was acceptable to us

• Some packages were pulled from the market at the end of February and new EXO bundles were

launched on March 14

• New offers are still attractive from a value perspective but are less appealing to entice existing

customers to repackage their services

• We have created positive momentum within our cable business and we will be more disciplined regarding
• ur approach to the market as we continue to believe that our subscriber base represents the long-term

profitability of our cable franchise and we need to protect our existing customers and compete for new subscriber opportunities

• Going forward we are focused on customer profitability and sustainable growth initiatives and we remain

confident about the long-term profitability and free cash flow profile of our consolidated business

• The Western Canadian economy continues to be strong and most believe that the competitive

landscape remains attractive in a more “normalized” duopoly environment going forward

• II. UPDATE ON SHAW'S STRATEGIC INITIATIVES

INVESTOR PRESENTATION | MAY 2012 |

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INVESTOR PRESENTATION

Strategic Investments:

• We continue to invest significant amounts of capital into our business so that our network is equipped to

handle increased capacity, support new technologies and provide greater options for our customers

• Our digital network upgrade (“DNU”) project, which converts analog tiers into digital, increases

capacity for additional HD channels, VOD options and higher Internet speeds

• The project will be completed in F13
• Broadband speed is a key differentiator over our competitor as we have the ability to offer

speeds up to 250 Mbps and large data packages (i.e. 400 GB) without affecting the quality

• f other Shaw services entering the home
• Our fibre assets represent a strategic advantage and we have ownership of over 625,000

km of fibre across North America

• We have also enhanced our set-top box line-up with the launch of the ARRIS Gateway box in May 2011
• The Gateway delivers a whole home network PVR solution by combining broadband and HD

technology

• This technology is the first of it’s kind in Canada and is being embraced by our “high-end”

customers

• II. UPDATE ON SHAW'S STRATEGIC INITIATIVES

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INVESTOR PRESENTATION

Strategic Investments:

• We partnered with Motorola and we will be launching our new “DreamGallery” guide and user interface

later in the year

• The benefit of DreamGallery is its ability to support HTML5 interfaces where a large part of the

functionality of services is moved from the box to the back-office

• This allows for personalization and other enhanced customization tools
• This improved interface will also be made available on Android and iOS tablets
• We still maintain our ownership of AWS spectrum and continue to view the spectrum as an appreciating

asset from a value perspective

• We also continue to view ownership of spectrum as providing tremendous flexibility regarding

strategic options

• We believe the value of our AWS spectrum, both financially and strategically, increases materially
• nce the restrictions governing the spectrum expire in 2014
• The rules for the 700 MHz auction were released on March 14th, which laid out the framework for

“spectrum caps” as opposed to “set asides” (note: essentially 4 blocks of “usable” spectrum in each geographical area)

• We continue to view the economics of a traditional wireless network as unattractive and have no

intention of building such infrastructure

• II. UPDATE ON SHAW'S STRATEGIC INITIATIVES

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INVESTOR PRESENTATION

Strategic Investments:

• During the course of our strategic wireless review (April – September 2011) we spent a considerable

amount of time exploring the merits of a comprehensive Wi-Fi strategy

• We announced our strategic intentions regarding a Wi-Fi build in September 2011 and since then

there has been a number of bullish articles and positive press coverage in North America and Internationally regarding the potential benefits of Wi-Fi going forward

• Recent reports have discussed the benefits of Cablecos (i.e. Cablevision, Charter, etc.)
• wning a Wi-Fi network, as it allows the cablecos to differentiate their broadband services

from their telco competitors, and provides incremental revenue opportunities

• As a technology, Wi-Fi is gathering a lot of attention regarding its role within the broadband

and wireless ecosystem

• These include cellular backhaul opportunities, open access Wi-Fi network to non-Shaw

customers (i.e. pay per hour/day etc.), targeted advertising etc.

• Discussions and speculation regarding the potential “disruptive” element of a Wi-Fi strategy,

where it essentially acts as a substitute to expensive data packages provided by the wireless company and impacts an wireless data ARPU, is intensifying

• Device manufacturers are de-emphasizing the carrier networks as it has been reported that a

majority of data usage takes place where Wi-Fi hotspots exist

• Some industry experts suggest that ultimately significant of wireless usage will take place

indoors and that subscribers have been educated to actively look for Wi-Fi connectivity for

• ffloading
• Note: our Wi-Fi strategy is consistent with all of the major carriers in the US (i.e. Cablevision,

Comcast, etc..)

• II. UPDATE ON SHAW'S STRATEGIC INITIATIVES

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INVESTOR PRESENTATION

Strategic Investments:

• We believe there are numerous benefits for Shaw to build a Wi-Fi network that is exclusive to Shaw customers

in our key markets in Western Canada

• Extension of our broadband service beyond the home increases the value proposition of our Internet

product and supports future pricing power

• Further differentiates our Internet service, which is a key consideration in the context of the competitive

realities of the Western Canadian market

• Internet is our highest margin product and is the stickiest component of our bundle
• Reduction of churn
• A presentation by Motorola in the US suggests a 10% reduction in Internet churn in the context of

roll out of a Wi-Fi network by a cable operator 1

• Creates a disruptive threat to the incumbents wireless business
• Encourages wireless customers to use our Wi-Fi network to reduce wireless data charges
• Complements our TV Everywhere strategy
• Enabling customers to view all of their TV services inside and outside the home on Shaw’s

infrastructure where content rights have been secured

• Increasing the value proposition of Shaw services and again supports pricing power
• Extends our home phone product with a SIP based service
• Attractive to our Shaw Business customers
• Enables portability of their data services
• Creates the possibility of a unique Shaw system
• Aligns with our strategy of providing on-demand services – customers get what they want, when

they want it, all from Shaw

• II. UPDATE ON SHAW'S STRATEGIC INITIATIVES

1 Scotia Capital Equity Research Biweekly Report dated July 25, 2011 – Converging Networks

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INVESTOR PRESENTATION

Strategic Investments:

• We continue to make progress in rolling out our Wi-Fi network (note: still in trial mode and we have

not marketed the service to-date)

• We currently have over 600 sites and 1,200 access points providing service in Calgary,

Edmonton and Vancouver

• Improved functionality (i.e. Shaw EXO Wi-Fi iPad application, linkage to user home Internet

package, etc.) is a key priority

• We will scale the network based on usage, however we believe the Wi-Fi network be

substantially complete by the end of F2014 Shaw Business:

• Shaw Business remains a near-term growth opportunity and has been a focus in F12
• This segment delivers over $200M in revenue and has experienced 20% growth the last

couple of years

• Recent success in this segment includes the City of Calgary, Husky Oilsands Camp

and BC Biomedical Laboratories

• We believe there is significant long term opportunity as the business telecom market in

Western Canada is estimated to be worth approximately $6B, while we currently hold an approximate 5% market share

• Growth will eventually shift to mid market businesses and thus more complex service
• fferings will be required
• Strategic builds will be necessary to increase addressable market
• II. UPDATE ON SHAW'S STRATEGIC INITIATIVES

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INVESTOR PRESENTATION

Customer Service Discussion:

• We believe that exceptional customer service is a differentiator in this competitive environment and

we continue to re-build our reputation after experiencing some difficulties during the second half of 2011

• A number of factors contributed to an increase in call volumes into our call centres which

resulted in long wait times

• Since then, we have hired an additional 1,000 employees and opened 3 new call centres to restore

and enhance customer service and current call/wait times have improved

• The call centres, known as Customer Solutions Centres, are located in Calgary, Vancouver

and Edmonton

• The intent of these groups is to be trained on telemarketing/sales however, they will switch
• ver to in-bound calls when our call volumes increase to help manage the “peak periods”
• We also began national call pooling in November to streamline calls and balance the

customer experience across all regions

• In addition, we are developing a more comprehensive on-line experience where customers will

have greater “self-serve options”

• Provides alternatives for customers to contact Shaw instead of having to phone into a call

centre

• II. UPDATE ON SHAW'S STRATEGIC INITIATIVES

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INVESTOR PRESENTATION

Marketing Initiatives / Packages:

• Increased competition has led us to spend more on our marketing and branding initiatives as we

compete for customers

• Our business is increasingly becoming a more “consumer” centric business and we believe

that an effective marketing and brand awareness campaign is an important pillar in the competitive fight

• With the launch of our new network, EXO, we had the opportunity to re-confirm our technology

leadership position to the market and create additional brand awareness with existing and new customers

• We believe that increased spending on customer awareness will continue as we roll-out new

products/features such as the EXO bundles, Wi-Fi, DreamGallery, etc.

• Our commitment to these marketing/branding initiatives is also evident with the recent hire of

Jim Little as our new Chief Marketing Officer

• Our new EXO bundles that were launched on March 14 are attractive from a value perspective for

both new and existing customers

• This “customer-focused” strategy will enable long-term success as pricing rationality within
• ur industry materializes under a more rationale duopoly environment
• II. UPDATE ON SHAW'S STRATEGIC INITIATIVES

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INVESTOR PRESENTATION

Satellite:

• Shaw Direct is focused on a number of items to drive our business forward, including; HD

leadership (launch of ANIK G1), service (lower churn than our competitor) and technology leadership (new Gateway, VOD opportunities)

• With the launch of ANIK G1 expected in November, we have the capacity for an additional

100 HD channels allowing us to offer over 200 HD channels to our customers

• A new Gateway/portal, in development with Motorola, is expected in early 2013 and offers

whole home capabilities (shared PVR, pause, resume etc.) and will utilize the DreamGallery software

• On April 4th we announced a strategic partnership with Xplornet
• This enablesus to offer our DTH customers a bundle that now includes Xplornet’s broadband

service (fixed wireless or satellite)

• II. UPDATE ON SHAW'S STRATEGIC INITIATIVES

INVESTOR PRESENTATION | MAY 2012 |

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INVESTOR PRESENTATION

Media:

• Applying a 10x EBITDA multiple that Bell paid for CTV and Astral to Shaw Media’s F11 financial

results, Shaw’s purchase of Canwest represents over $1 billion of additional value compared to the

• riginal purchase price of $2 billion
• Media growth in F11 was better than anticipated with 25% EBITDA growth YoY to $325

million, however market softness due to continued economic volatility will keep EBITDA relatively flat in F12

• Note: specialty remains strong but conventional is being pressured
• Shaw Media maintains the strongest specialty portfolio of any broadcaster with leading

positions in lifestyle and dramatic programming and we are excited about the launch of

• ur BC regional news network that will further enhance Global’s dominant position in

Western Canada

• We also believe that the ownership of content has helped protect the profitability of Shaw’s

distribution business

• Shaw Media has provided additional negotiating leverage in programming rate renewal

discussions with other broadcasters

• We believe one of the benefits of owning content is to enhance our “TV Everywhere” initiatives,

which is a key strategic priority for our Company going forward

• II. UPDATE ON SHAW'S STRATEGIC INITIATIVES

INVESTOR PRESENTATION | MAY 2012 |

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INVESTOR PRESENTATION

Media:

• Content will continue to be a the key factor influencing our Media business and we need to ensure

we effectively monetize this asset across multiple platforms

• It also gives us more leverage as we negotiate on demand/multi-platform rights, which are

critical to mitigating the impact of Netflix and other OTT entrants

• Consumption of content via VOD and through online services continues to increase and we

need to ensure we are “measuring and monetizing” these viewers

• We are deepening our relationships with key channel partners and we are leveraging our US

studio relationships with co-production opportunities as we continue to be the broadcast partner of choice for the best Canadian producers

• Continued focus on our core program genres of Food, Home Improvement and History
• Allows us to further leverage our brand with advertising partners
• II. UPDATE ON SHAW'S STRATEGIC INITIATIVES

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INVESTOR PRESENTATION

• III. FINANCIAL INFORMATION

Notes: Figures exclude wireless investments *2010 figures exclude CRTC Part II Fee recovery **2011 figures reflect 10-months impact of Shaw Media

$2,774 $3,105 $3,391 $3,718 $3,850 $1,240 $1,408 $1,541 $1,685 $1,779

$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 2007 2008 2009 2010 * 2011A**

$CDN MM

Consolidated Annual Revenue and EBITDA

(Fiscal Year Ending August 31) Core Revenue Core EBITDA

$891 $4,741 $252 $2,031

Media Revenue Media EBITDA

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INVESTOR PRESENTATION

• Our consolidated business continues to generate substantial FCF
• F12 FCF is expected to be approximately $450 million
• We will continue to invest in our strategic initiatives and focus on sustainable growth
• III. FINANCIAL INFORMATION

*2011A FCF includes 10-months of Media contribution 2010 adjusted for CRTC Part II Fee Recovery

$355 $451 $505 $514 $603 $529 $601 $843

$0 $100 $200 $300 $400 $500 $600 $700 $800 $900 2007A 2008A 2009A 2010A 2011A*

(C$ millions)

Consolidated Free Cash Flow (ex. wireless) (2007A - 2012E)

FCF Adjusted Untaxed FCF

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INVESTOR PRESENTATION

• We believe our approach to the competitive environment is the appropriate strategy for the benefit
• f our stakeholders over the long-term
• Protecting and growing our subscriber base will enhance the long-term value of our cable

franchise

• Broadband leadership continues to be a differentiator and with more online data being consumed

we believe we have an opportunity to monetize our network advantage

• While our Wi-Fi ambitions are largely defensive (i.e. reduce churn), we do believe the product will

help protect and grow our residential broadband offering

• We also believe that an extensive Wi-Fi network in our core cities in Western Canada will

enable pricing power within our residential bundle, disrupt incumbent wireless operators data plans and present other revenue opportunities for Shaw in the future

• Shaw Business represents one of our largest near-term growth opportunities and will become a

material component of our consolidated financial picture

• Currently contributes in excess of $200 million of revenue
• IV. CONCLUSION

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INVESTOR PRESENTATION

• Shaw Media’s financial performance continues to be strong and we are excited about exploiting the
• pportunities with respect to being a vertically integrated provider in Canada
• Extended reach creates an opportunity to brand Shaw coast-to-coast and create more

customer awareness/brand loyalty throughout Canada

• Ownership of content provides opportunities to develop a robust TV Everywhere/OTT

strategy, enables innovative channel packaging and provides the ability for differentiated content over broadband and Wi-Fi platforms

• While we are bullish regarding the numerous opportunities that present themselves, we also

recognize that considering the maturity of our consolidated business & industry and the competitive environment, growth rates will not be as robust compared to historical levels

• We continue to believe that our business will generate significant amounts of FCF going

forward which will help support return of capital initiatives to shareholders

• IV. CONCLUSION

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