TABLE OF CONTENTS I. Investor Highlights II. III. IV. Strategic Focus Operating Performance Digital TV Internet Phone Shaw Direct SHAW COMMUNICATIONS INC. INVESTOR UPDATE MAY 2012 Review of F2011 Financial Results & F2012 Guidance V. Shaw Media VI. Leverage Review VII. Conclusion 1 INVESTOR PRESENTATION MAY 2012
TABLE OF CONTENTS I. Investor Highlights II. Update on Shaw s Strategic Initiatives III. Financial Information IV. Conclusion 2 INVESTOR PRESENTATION MAY 2012
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. 3 INVESTOR PRESENTATION MAY 2012
I. INVESTOR HIGHLIGHTS 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 4 INVESTOR PRESENTATION MAY 2012
I. INVESTOR HIGHLIGHTS 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 Subscriber Base as @ February 29, 2012 2,257,061 2,500,000 1,925,518 1,906,597 2,000,000 1,283,083 1,500,000 910,688 1,000,000 500,000 0 5 INVESTOR PRESENTATION MAY 2012
Dividend Payments to Shareholders ($MM) Effective Annual Dividend Rate per Share INVESTOR PRESENTATION I. INVESTOR HIGHLIGHTS 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 $500 $400 $300 $200 $0.16 $201 $0.71 $304 Dividend Payments $0.88 $0.92 $0.82 $391 $352 $372 $0.97 $415 $1.20 $1.00 $0.80 $0.60 $0.40 $100 $0.20 6 $0 $0.00 2007A 2008A 2009A 2010A 2011A 2012E Total Annual Dividend Payments Effective Dividend/Class B Share at end of fiscal year INVESTOR PRESENTATION MAY 2012
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 7 INVESTOR PRESENTATION MAY 2012
Cdn $ million's Net Additions 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 Cable Revenue & EBITDA (2009-2011) Subscribers - Net Additions (2009-2011) $3,500.0 $3,000.0 $2,500.0 $2,000.0 $1,500.0 $1,000.0 $500.0 $- 10.8% 10.1% 11.3% 10.8% 5.6% FY09 FY10 FY11 6.2% 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 (50,000) (100,000) FY09 FY10 FY11 Revenue EBITDA Basic Digital TV Phone Internet 8 % Represents annual revenue & EBITDA growth respectively Note: F10 excludes impact of CRTC Part II Fee INVESTOR PRESENTATION MAY 2012
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 9 INVESTOR PRESENTATION MAY 2012
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 10 INVESTOR PRESENTATION MAY 2012
(9,946) (22,768) (13,662) Net Additions 1,274 531 10,685 2,176 18,681 10,772 22,969 Net Additions 35,403 32,512 46,564 59,566 54,407 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 80,000 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 Net Additions Comparison YoY & QoQ Core RGU Trend 63K 80,000 60,000 30K 60,000 40,000 11K 40,000 20,000 20,000 0 (20,000) 0 (20,000) (40,000) Basic Internet Digital TV Phone Shaw Direct Q2/12 Q1/12 Q2/11 11 INVESTOR PRESENTATION MAY 2012 Q2/11 Q1/12 Basic Internet Phone Q2/12 (40,000)
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 our 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 12 INVESTOR PRESENTATION MAY 2012
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 of 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 13 INVESTOR PRESENTATION MAY 2012
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 once 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 14 INVESTOR PRESENTATION MAY 2012
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.) owning 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 offloading Note: our Wi-Fi strategy is consistent with all of the major carriers in the US (i.e. Cablevision, Comcast, etc..) 15 INVESTOR PRESENTATION MAY 2012
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 16 INVESTOR PRESENTATION MAY 2012 1 Scotia Capital Equity Research Biweekly Report dated July 25, 2011 Converging Networks
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 offerings will be required 17 INVESTOR PRESENTATION MAY 2012 Strategic builds will be necessary to increase addressable market
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 over 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 18 INVESTOR PRESENTATION MAY 2012
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 our industry materializes under a more rationale duopoly environment 19 INVESTOR PRESENTATION MAY 2012
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 4 th 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) 20 INVESTOR PRESENTATION MAY 2012
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 original 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 our 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 21 INVESTOR PRESENTATION MAY 2012
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 22 INVESTOR PRESENTATION MAY 2012
$CDN MM INVESTOR PRESENTATION III. FINANCIAL INFORMATION $4,500 Consolidated Annual Revenue and EBITDA (Fiscal Year Ending August 31) $4,741 $4,000 $891 $3,500 $3,000 $2,500 $2,774 $3,105 $3,391 $3,718 $3,850 $2,031 $2,000 $252 $1,500 $1,000 $1,240 $1,408 $1,541 $1,685 $1,779 $500 $0 2007 2008 2009 2010 * 2011A** Core Revenue Core EBITDA Media Revenue Media EBITDA Notes: Figures exclude wireless investments *2010 figures exclude CRTC Part II Fee recovery **2011 figures reflect 10-months impact of Shaw Media 23 INVESTOR PRESENTATION MAY 2012
(C$ millions) INVESTOR PRESENTATION III. FINANCIAL INFORMATION 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 $900 Consolidated Free Cash Flow (ex. wireless) (2007A - 2012E) $800 $700 $843 $600 $500 $400 $451 $505 $529 $514 $601 $603 $300 $355 $200 $100 $0 2007A 2008A 2009A 2010A 2011A* FCF Adjusted Untaxed FCF *2011A FCF includes 10-months of Media contribution 2010 adjusted for CRTC Part II Fee Recovery 24 INVESTOR PRESENTATION MAY 2012
IV. CONCLUSION We believe our approach to the competitive environment is the appropriate strategy for the benefit of 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 25 INVESTOR PRESENTATION MAY 2012
IV. CONCLUSION Shaw Media s financial performance continues to be strong and we are excited about exploiting the opportunities 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 26 INVESTOR PRESENTATION MAY 2012
27 INVESTOR PRESENTATION MAY 2012