Shaw drops plan to get into cellular wire service market

Shaw Communications Inc. formally dropped its bid to launch a cellular wireless service Thursday, saying the costs of erecting a new network and scale of its would-be competitors made the investment unjustifiable. "The economics of a conventional wireless business as a new entrant are extremely challenging. New entrants lack the economies of scale and scope to compete effectively against well established incumbents with ubiquitous coverage, extensive device ecosystems, deep spectrum positions and large retail networks," the country's largest cable television provider said in a news release. A move into wireless would pit Shaw directly against powerful incumbent operators Rogers Communications Inc., Bell Mobility and Telus Corp., its chief Internet and television competitor in Western Canada. Though the market has increasingly cast doubt on Shaw's intentions to launch wireless, management until Thursday maintained the view that the company would utilize the $190-million it spent to acquire spectrum licences to bring on the service. "The decision is not a complete surprise," Jonathan Allen at RBC Capital Markets said. "The (capital expenditure) cost to do it alone is very high and returns have been more modest than initially expected," he said. Still, wireless is considered to be the major growth catalyst for telecom service providers in the coming years as the markets for older, more established products like fixed-line Internet, television and home phones saturate and prices commoditize from competition. That is perhaps why the Calgary-based company is not abandoning its mobile ambitions altogether, saying it will build out a local wireless network across areas of its cable footprint. Such a move would allow for mobile devices like tablets and smartphones to access the Internet through Shaw's wireline broadband network. For Shaw specifically, certain analysts say it is crucial it develop some kind of wireless response to Telus, which has improved its broadband and TV offerings in recent years. Without wireless, the company is less able to guard its core base.