DBRS Confirms Shaw Communications Inc. Senior Notes BB(high)

Dominion Bond Rating Service (“DBRS”) has today confirmed the ratings of Shaw Communications Inc.’s (“Shaw” or the “Company”) Senior Notes at BB (high) and related ratings as noted above. The trends are Positive.

DBRS is maintaining the Positive trend (placed in February 2005) at this time given Shaw has not remained committed to debt reduction over the near term. In fact, the Company has deferred any debt reductions until fiscal 2007 and instead will continue to use free cash flow to buy back shares and raise dividends. Given Shaw’s strong fundamentals, the ratings could be upgraded if the Company were committed to strengthening its balance sheet, which would underpin its credit profile. Otherwise, the trend could revert to Stable if operations stall or if Shaw increases debt.

DBRS notes that the ratings are underpinned by the Company’s strong fundamentals, including: (1) basic cable and DTH subscribers are stable; (2) ARPU is growing; (3) initial digital telephony penetration has exceeded expectations; (4) broadband growth continues; (5) the competitive market remains rational; and (6) DTH is contributing cash (historically it has been a drain).

Shaw has begun rolling out digital telephony and can now offer a “triple play” of video, telephony, and broadband in some markets, in an effort to bundle customers, increase ARPU, and reduce churn levels. To date, demand for telephony service has been robust. DBRS notes that Shaw has been disciplined in its telephony pricing strategy, which has likely contributed to an overall rational competitive environment in western Canada, whereby a price war has not begun with telco operators. Even so, telco operators could become more aggressive through bundling discounts and promotions if Shaw began to heavily discount prices of residential telephony. This does not appear to be the case at this time.

DBRS notes that although Shaw’s financial profile is slowly strengthening through improvements from operations, this does not yet indicate an investment-grade rating.

Note:
y – designates hybrid instrument.