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It’s Time to Get Greedy With Shaw Communications Inc. (TSX:SJR.B)

I’ve long held the view that Canada’s telecoms are some of the best investments on the market for long-term investors. All four telecoms offer similar competing services and stellar dividends to investors. Even in the case of new investments, they have predominately gravitated toward the same types of investments, whether that’s professional sports teams or media holdings.

The telecoms are so similar in many ways that they are often compared on the basis of which is the better investment.

The one exception to this lies with Shaw Communications Inc. (TSX:SJR.B)(NYSE:SJR). Shaw sold off control of its own media holdings for the acquisition and build out of its own wireless network to counter the other three telecoms.

The $1.85 billion deal was completed over two years ago, which also Shaw receive over 71 million shares of Corus Entertainment Inc., ultimately giving Shaw a 37% ownership in Corus and distinguishing Shaw from its peers as a pure-play with massive potential.

Shaw’s mobile offering, which was built off the former Wind network, has since been rebranded as Freedom Mobile.

Why wireless?

Shaw had incredible foresight in seeing something that was blatantly obvious. Of the four primary segments that telecoms offer, the wireless segment is the one that holds the most growth potential to the point that wireless service could and likely already is cannibalizing the other three segments.

Let me elaborate on this further for a moment.

Everyone has a smartphone. We’ve hit the saturation point in the market where we are seeing fewer and fewer dumb-phones, whereas the features and functions of smartphones continue to evolve by the day.

By example, take a moment and think back to what a typical day was a decade ago to what it is today. Think of the devices you would interact with then – an alarm clock, an iPod or Mp3 player, a clock radio at work, a written calendar or PDA at work, a portable DVD player, a standalone camera, a crossword or a book on the train.

All of those can be done on a smartphone now, and as our devices become ever more connected to the world around us, they will continue to account for an increasing number of tasks in the years ahead.

That’s massive long-term potential.

What about results?

Shaw announced quarterly results last week for the third fiscal of 2018, which showed a $91 million loss that could be traced back to Shaw’s investment in Corus.

Corus, which also reported results last week, reported a net loss attributable to shareholders of $935.9 million for the quarter, which resulted in the company slashing its dividend by 80% and triggering a sell-off on the stock.

Shaw reported an impairment charge on Corus assets of $284 million in the quarter, which ultimately resulted in a net loss of $91 million for the quarter. In comparison, in the same quarter last year, the company earned $133 million.

Shaw’s Freedom Mobile continues to be the primary growth driver for the company, with 54,000 new postpaid additions in the most recent quarter, which is likely to grow further in the next few quarters as Shaw announced an expansion to its retail distribution network that will see Freedom mobile devices sold in upwards of 600 retail locations across the country within the next year.

Freedom mobile now has 1.32 million post-paid wireless subscribers.

Why is it time to get greedy?

Corus’ results weighed down on Shaw, but that doesn’t make Shaw any less of a buy for investors. If anything, the recent results show both the strength and opportunity posed by Freedom Mobile continuing to disrupt the mobile space in Canada.

If for no other reason, Shaw’s incredibly appetizing dividend provides a 4.43% yield that makes the company a great income investment.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Demetris Afxentiou has no position in any stocks mentioned.


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