Shaw Communications: Becoming a Connectivity Pure Play?

In late 2015, the chief executive officer of Shaw Communications was considering whether to reduce or divest the company’s media assets. Shaw Communications had been founded as a cable television provider and, over the years, had grown its consumer connectivity businesses to include Internet services, satellite television, landline telephony, and, most recently, cellular network services. Similar to most other major Canadian telecommunications companies, Shaw Communications had acquired media assets, including the Global Television Network and specialty channels such as History and Treehouse. Selling all or, some, of these media assets would strengthen the company’s balance sheet and help finance the expansion of its cellular network. The company’s chief executive officer needed decide how important media assets were to the company’s core strategy.

After completion of this case, students will be able to<ul><li>weigh the arguments for and against participating in two vertically related businesses: (1) the upstream media (content) business, and (2) the downstream connectivity, digital delivery of that media content;</li><li>explain how vertical integration applies when the same company owns two businesses;</li><li>distinguish between (partial) vertical integration and digital assets that can be easily reproduced and differ substantially from conventional, “hard” non-reproducible assets;</li><li>understand how regulations in the telecommunications industry allow telecommunications players to use their media assets to leverage their connectivity assets;</li><li>consider Shaw’s overall strategic imperatives and its priorities for resource allocation;</li><li>examine how selling its media assets would strengthen the company’s balance sheet and better position the company for future investments in the cellular business; and</li><li>discuss how the resulting higher leverage or equity dilution would affect the family’s control of the company if the company chose to keep its media business and invest in the cellular business.</li><ul>

• vertical integration, diversification