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Shaw Announces First Quarter Financial and Operating Results

(January 12, 2012)

CALGARY, ALBERTA -- (Marketwire) -- 01/12/12 -- Shaw Communications Inc. (TSX:SJR.B) (NYSE:SJR) announced consolidated financial and operating results for the three months ended November 30, 2011 and 2010 in accordance with the newly adopted International Financial Reporting Standards ("IFRS"). Consolidated revenue for the three month period of $1.28 billion was up 19% over the comparable period last year. Total operating income before amortization(1) of $566 million increased 18% over the same period last year.

Free cash flow(1)for the quarter was $119 million compared to $154 million for the same period last year. Improved operating income before amortization in the current period was reduced by higher capital investment related to strategic initiatives as well as increased interest and cash taxes.

Chief Executive Officer Brad Shaw said, "Our financial performance this quarter was solid. We continued to grow despite a volatile economic and competitive environment."

Mr. Shaw continued, "We have a number of strategic initiatives underway including our digital network upgrade and Wi-Fi build that support our leadership position in broadband and video, strengthening our core business. Our digital network upgrade is well underway and we recently started the trial of our Wi-Fi network at a variety of locations in Calgary, Edmonton and Vancouver. We also recently opened three new Customer Solutions Centres, all in Canada consistent with our existing centres, adding resources to handle both inbound and outbound customer service. Shaw has been built on a reputation of superior customer service and we are committed to retaining this advantage."


Net income from continuing operations of $202 million or $0.43 per share for the quarter ended November 30, 2011 compared to $17 million or $0.03 per share for the same period last year. All periods included non-operating items which are more fully detailed in Management's Discussions and Analysis (MD&A).(2) The prior period included a charge of $139 million for the discounted value of the CRTC benefit obligation related to the acquisition of Shaw Media, as well as business acquisition, integration and restructuring expenses of $58 million. Excluding the non-operating items, net income for the three month period ended November 30, 2011 would have been $210 million compared to $164 million in the same period last year.

Revenue in the Cable division was up 4% for the three month period to $792 million. The improvement was primarily driven by customer growth and price changes. Operating income before amortization of $377 million was up 7% for the quarter.

Revenue in the Satellite division was $209 million for the three month period, up from $206 million for the same period last year. Operating income before amortization for the quarter of $69 million was comparable to the same period last year.

Revenue in the Media division for the three month period was $299 million and operating income before amortization was $120 million. For informational purposes, on a full quarter comparative basis to Q1 last year, Media revenues and operating income before amortization for the quarter declined 3% and 8%, respectively, reflecting the softening in the advertising market as a result of economic uncertainty.

Mr. Shaw concluded "Our performance is on track. Our management team continues to execute on the necessary strategic initiatives in this highly competitive environment. Our commitment to customer service and the strength of our delivery system, including our network infrastructure and employee base, have us positioned to deliver another year of solid financial and operational performance."

Shaw Communications Inc. is a diversified communications and media company, providing consumers with broadband cable television, High-Speed Internet, Home Phone, telecommunications services (through Shaw Business), satellite direct-to-home services (through Shaw Direct) and engaging programming content (through Shaw Media). Shaw serves 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. Shaw is traded on the Toronto and New York stock exchanges and is included in the S&P/TSX 60 Index (TSX:SJR.B) (NYSE:SJR).

The accompanying Management's Discussion and Analysis forms part of this news release and the "Caution Concerning Forward Looking Statements" applies to all forward-looking statements made in this news release.

(1) See definitions and discussion under Key Performance Drivers in MD&A.

(2) See reconciliation of Net Income in Consolidated Overview in MD&A

MANAGEMENT'S DISCUSSION AND ANALYSIS

NOVEMBER 30, 2011

January 12, 2012

Certain statements in this report may constitute forward-looking statements. Included herein is a "Caution Concerning Forward-Looking Statements" section which should be read in conjunction with this report.

The following Management's Discussion and Analysis ("MD&A") should also be read in conjunction with the unaudited interim consolidated Financial Statements and Notes thereto of the current quarter, the 2011 Annual MD&A included in the Company's August 31, 2011 Annual Report including the Consolidated Financial Statements and the Notes thereto.

The financial information presented herein has been prepared on the basis of International Financial Reporting Standards ("IFRS") for interim financial statements and is expressed in Canadian dollars unless otherwise stated. The amounts in this MD&A and the Company's interim financial statements for the period ended November 30, 2010 have been restated to reflect the adoption of IFRS, with effect from September 1, 2010. Periods prior to September 1, 2010 have not been restated and are prepared in accordance with Canadian GAAP. Refer to note 13 of the November 30, 2011 interim financial statements for a summary of the differences between the financial statements previously prepared under Canadian GAAP and to those under IFRS.

The unaudited IFRS related disclosures and values in this MD&A have been prepared using the standards and interpretations currently issued and expected to be effective at the end of the Company's first annual IFRS reporting period, which will be August 31, 2012. Certain accounting policies expected to be adopted under IFRS may not be adopted and the application of policies to certain transactions or circumstances may be modified and as a result, the November 30, 2011 and August 31, 2011 underlying values prepared on a basis consistent with IFRS are subject to change.

CONSOLIDATED RESULTS OF OPERATIONS

FIRST QUARTER ENDING NOVEMBER 30, 2011

Selected Financial Highlights

Three months ended November 30, ----------------------------------------------- Change 2011 2010 % ---------------------------------------------------------------------------- ($millions Cdn except per share amounts) Operations: Revenue 1,279 1,079 19 Operating income before amortization (1) 566 479 18 Operating margin (1) 44.2% 44.4% Funds flow from continuing operations (2) 356 265 34 Net income from continuing greater than operations 202 17 100 Per share data: Earnings per share - basic and diluted From continuing operations 0.43 0.03 Weighted average participating shares outstanding during period (millions) 438 434 ----------------------------------------------------------------------------

(1) See definition under Key Performance Drivers in MD&A.

(2) Funds flow from continuing operations is before changes in non-cash working capital balances related to operations as presented in the unaudited interim Consolidated Statements of Cash Flows.

Subscriber Highlights

Growth ------------------------------- Three months ended November Total 30, ----------------------------------------------- November 30, 2011 2011 2010 ---------------------------------------------------------------------------- Subscriber statistics: Basic cable customers 2,267,007 (22,768) (7,542) Digital customers 1,878,954 59,566 62,216 Internet customers (including pending installs) 1,887,916 10,685 18,752 Digital phone lines (including pending installs) 1,256,010 22,969 49,842 DTH customers 909,414 531 (1,539) ----------------------------------------------------------------------------

Additional Highlights

-- Revenue of $1.28 billion for the three month period improved 19% over the comparable period last year. -- Free cash flow(1) for the quarter was $119 million compared to $154 million for the same period last year.

Consolidated Overview

Consolidated revenue of $1.28 billion for the quarter improved 19% over the same period last year. The improvement was primarily due to the inclusion of Shaw Media for the full quarter, as well as customer growth and price changes in the Cable and Satellite divisions. Consolidated operating income before amortization for the three month period of $566 million was up 18% over the same period last year. The current period included a full quarter of Shaw Media and improved revenue related growth in the Cable and Satellite divisions, partially offset by higher programming expenses and employee related costs.

Net income was $202 million for the three months ended November 30, 2011 compared to $16 million for the same period last year. Non-operating items affected net income in both periods. The prior period included a charge of $139 million for the discounted value of the CRTC benefit obligation, net of incremental revenues, related to the Media acquisition, as well as business acquisition, integration and restructuring expenses of $58 million. Outlined below are further details on these and other operating and non-operating components of net income for each period.

(1) See definitions and discussion under Key Performance Drivers in MD&A.

($millions Cdn) Three months ended ------------------------------------------------ November 30, Operating net 2011 of interest Non-operating ---------------------------------------------------------------------------- Operating income 372 Amortization of financing costs - long-term debt (1) Interest expense - debt (82) ---------------------------------------------------------------------------- Operating income after interest 289 289 - CRTC benefit obligation - - - Business acquisition, integration and restructuring expenses - - - Loss on derivative instruments - - - Accretion of long-term liabilities and provisions (4) - (4) Foreign exchange gain on unhedged long-term debt - - - Other gains (losses) (6) - (6) ---------------------------------------------------------------------------- Income (loss) before income taxes 279 289 (10) Current income tax expense (recovery) 84 84 - Deferred income tax expense (recovery) (7) (5) (2) ---------------------------------------------------------------------------- Income (loss) before following 202 210 (8) Equity income from associates - - - ---------------------------------------------------------------------------- Net income (loss) from continuing operations 202 210 (8) ---------------------------------------------------------------------------- ($millions Cdn) Three months ended ----------------------------------------------- November 30, Operating net 2010 of interest Non-operating -------------------------------------------------------------------------- Operating income 299 Amortization of financing costs - long-term debt (1) Interest expense - debt (69) -------------------------------------------------------------------------- Operating income after interest 229 229 - CRTC benefit obligation (139) - (139) Business acquisition, integration and restructuring expenses (58) - (58) Loss on derivative instruments (1) - (1) Accretion of long-term liabilities and provisions (2) - (2) Foreign exchange gain on unhedged long-term debt 3 - 3 Other gains (losses) 2 - 2 -------------------------------------------------------------------------- Income (loss) before income taxes 34 229 (195) Current income tax expense (recovery) 55 60 (5) Deferred income tax expense (recovery) (24) 5 (29) -------------------------------------------------------------------------- Income (loss) before following 3 164 (161) Equity income from associates 14 - 14 -------------------------------------------------------------------------- Net income (loss) from continuing operations 17 164 (147) --------------------------------------------------------------------------

The changes in net income from continuing operations are outlined in the table below.

November 30, 2011 net income from continuing operations compared to: ------------------------------- Three months ended ------------------------------ August 31, November 30, 2011 2010 ---------------------------------------------------------------------------- ($millions Cdn) Increased operating income before amortization 85 87 Increased amortization (8) (14) Decreased (increased) interest expense 6 (13) Change in net other costs and revenue (1) (30) 171 Increased income taxes (18) (46) ---------------------------------------------------------------------------- 35 185 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------

(1) Net other costs and revenue includes the CRTC benefit obligation, business acquisition, integration and restructuring expenses, gain on redemption of debt, loss on derivative instruments, accretion of long-term liabilities and provisions, foreign exchange gain on unhedged long-term debt, other gains (losses) and equity income from associates as detailed in the unaudited interim Consolidated Statements of Income.

Basic earnings per share were $0.43 for the quarter compared to $0.03 in the same period last year. The increase was primarily due to improved operating income before amortization of $87 million and lower net other costs and revenue of $171 million, the total of which were partially reduced by increased income taxes, amortization, and interest of $46 million, $14 million and $13 million, respectively. The change in net other costs and revenue was primarily due to amounts included in the prior year related to the CRTC benefit obligation and various acquisition, integration and restructuring costs. Operating income before amortization was up in the current period mainly due to the inclusion of Shaw Media for the full quarter as well as growth in the Cable division.

Net income in the current quarter was up $35 million compared to the fourth quarter of fiscal 2011 mainly due to higher operating income before amortization of $85 million partially reduced by increased net other costs and revenue of $30 million and increased income taxes of $18 million. The improved operating income before amortization was mainly due to higher amounts from Media due to seasonality of the business. The change in net other costs and revenue was primarily due to a gain realized in the prior quarter on the redemption of the US$ senior notes.

Free cash flow for the quarter of $119 million compared to $154 million in the same period last year. The decrease was mainly due to higher capital investment of $50 million in the current period related to strategic initiatives, as well as increased interest and cash taxes, partially offset by improved operating income before amortization. Operating income was up mainly due to the full quarter inclusion of Media as well as growth in the Cable division.

Key Performance Drivers

The Company's continuous disclosure documents may provide discussion and analysis of non-IFRS financial measures. These financial measures do not have standard definitions prescribed by IFRS and therefore may not be comparable to similar measures disclosed by other companies. The Company's continuous disclosure documents may also provide discussion and analysis of additional GAAP measures. Additional GAAP measures include line items, headings, and sub-totals included in the financial statements. The Company utilizes these measures in making operating decisions and assessing its performance. Certain investors, analysts and others, utilize these measures in assessing the Company's operational and financial performance and as an indicator of its ability to service debt and return cash to shareholders. The non-IFRS financial measures and additional GAAP measures have not been presented as an alternative to net income or any other measure of performance required by IFRS.

The following contains a listing of non-IFRS financial measures and additional GAAP measures used by the Company and provides a reconciliation to the nearest IFRS measurement or provides a reference to such reconciliation.

Operating income before amortization and operating margin

Operating income before amortization is calculated as revenue less operating, general and administrative expenses and is presented as a sub-total line item in the Company's unaudited interim Consolidated Statements of Income. It is intended to indicate the Company's ability to service and/or incur debt, and therefore it is calculated before amortization (a non-cash expense) and interest. Operating income before amortization is also one of the measures used by the investing community to value the business. Operating margin is calculated by dividing operating income before amortization by revenue.

Free cash flow

The Company utilizes this measurement as it measures the Company's ability to repay debt and return cash to shareholders.

Free cash flow is calculated as operating income before amortization, less interest, cash taxes paid or payable, capital expenditures (on an accrual basis and net of proceeds on capital dispositions) and equipment costs (net), adjusted to exclude stock-based compensation expense, less cash amounts associated with funding the new and assumed CRTC benefit obligation related to the acquisition of Shaw Media as well as excluding non-controlling interest amounts that are consolidated in the operating income before amortization, capital expenditure and cash tax amounts.

Commencing in 2012 free cash flow has not been reported on a segmented basis. Certain components of free cash flow including operating income before amortization, capital expenditures (on an accrual basis) net of proceeds on capital dispositions and equipment costs (net), CRTC benefit obligation funding, and non-controlling interest amounts continue to be reported on a segmented basis. Other items, including interest and cash taxes, are not generally directly attributable to a segment, and are reported on a consolidated basis. Also commencing in 2012, Shaw has reported the changes in receivable related balances with respect to customer equipment financing transactions as a cash item, and adjusted for cash funding of pension amounts net of pension expense. Free cash flow has also been reduced for dividends paid on the Company's Cumulative Redeemable Rate Reset Preferred Shares.

Free cash flow is calculated as follows:

Three months ended November 30, ----------------------------------------------- Change 2011 2010 (2) % ----------------------------------------------- ($millions Cdn) Revenue Cable 792 758 4 Satellite 209 206 1 Media greater than 299 125 100 ---------------------------------------------------------------------------- 1,300 1,089 19 Intersegment eliminations greater than (21) (10) 100 ---------------------------------------------------------------------------- 1,279 1,079 19 ---------------------------------------------------------------------------- Operating income before amortization (1) Cable 377 353 7 Satellite 69 69 - Media greater than 120 57 100 ---------------------------------------------------------------------------- 566 479 18 ---------------------------------------------------------------------------- Capital expenditures and equipment costs (net): Cable 223 178 25 Satellite 25 24 4 Media greater than 6 2 100 ---------------------------------------------------------------------------- Total as per Note 3 to the unaudited interim condensed Consolidated Financial Statements 254 204 25 ---------------------------------------------------------------------------- Free cash flow before the following 312 275 13 Less: Interest (82) (64) 28 Cash taxes (84) (60) 40 Other adjustments: Non-cash share-based compensation 2 3 (33) CRTC benefit obligation greater than funding (10) (2) 100 Non-controlling interests greater than (11) (4) 100 Pension adjustment 4 6 (33) Customer equipment greater than financing (8) - 100 Preferred share dividends greater than (4) - 100 ---------------------------------------------------------------------------- Free cash flow 119 154 (23) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Operating margin (1) Cable 47.6% 46.6% 1.0 Satellite 33.0% 33.5% (0.5) Media 40.1% 45.6% (5.5) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- 1. See definitions and discussion under Key Performance Drivers in MD&A. 2. Restated to reflect changes in the calculation related to the pension adjustment and customer equipment financing.

CABLE

FINANCIAL HIGHLIGHTS

Three months ended November 30, ----------------------------------------------- Change 2011 2010 % ----------------------------------------------- ($millions Cdn) Revenue 792 758 4 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Operating income before amortization (1) 377 353 7 Capital expenditures and equipment costs (net): New housing development 22 26 (15) Success based 90 63 43 Upgrades and enhancement 87 62 40 Replacement 11 12 (8) Buildings and other 13 15 (13) ---------------------------------------------------------------------------- Total as per Note 3 to the unaudited interim condensed Consolidated Financial Statements 223 178 25 ---------------------------------------------------------------------------- Operating margin (1) 47.6% 46.6% 1.0 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- 1. See definitions and discussion under Key Performance Drivers in MD&A.

Operating Highlights

-- Digital customers increased 59,566 during the quarter to 1,878,954. Shaw's Digital penetration of Basic is now 82.9%, up from 79.5% and 70.7% at August 31, 2011 and 2010, respectively. -- Digital Phone lines increased 22,969 during the three month period to 1,256,010 lines and Internet was up 10,685 to total 1,887,916 as at November 30, 2011. During the quarter Basic cable subscribers decreased 22,768.

Cable revenue improved 4% over the comparable period last year to $792 million. Price changes, along with customer growth in Internet and Digital Phone and reduced promotional activity, the total of which was partially offset by lower Basic cable subscribers, accounted for the improvement. Operating income of $377 million increased 7% over the comparable quarter. The revenue related growth was partially reduced by increased programming costs and higher employee related amounts, mainly due to annual merit increases.

Revenue increased 1% over the fourth quarter of fiscal 2011 primarily due to price changes and customer growth in Internet and Digital Phone partially offset by lower Basic cable subscribers. Operating income before amortization declined $20 million over this same period primarily due to increased expenses including employee related costs, mainly due to annual merit increases, and employee growth related to strategic initiatives, as well as higher programming costs.

Total capital investment of $223 million for the quarter increased $45 million over the same period last year.

Success-based capital increased $27 million over the comparable three month period due to increased subsidies on sales of HDPVRs resulting from lower customer pricing and higher volumes, deployment of digital set-top boxes related to the digital network upgrade, partially offset by lower HDPVR rentals. The current period also included increased spend on internet modems in support of new broadband offerings.

Investment in Upgrades and enhancement and Replacement categories increased $24 million over the same period last year. The current quarter included higher spending on hub upgrades and network electronics related to the Digital Network Upgrade, and investment related to the Wi-Fi build.

Investment in Buildings and other was moderately lower than the comparable three month period last year. The decrease was mainly due to lower spend related to back office infrastructure upgrades partially offset by higher activity on various facilities projects including the new Calgary data centre.

Spending in new housing development decreased $4 million over the comparable quarter last year mainly due to lower activity.

As at November 30, 2011 Shaw had 1,256,010 Digital Phone lines which represents a 55.4% penetration of Basic. Shaw also continued to grow its Digital customer base and Digital penetration of Basic at November 30, 2011 was 82.9%, up from 79.5% at August 31, 2011. During the quarter Shaw became the first television provider in Canada to offer full seasons of Saturday Night Live commercial free to customers through Shaw VOD and also launched new family focused channels including Disney XD in SD and HD, Family Channel HD and Disney Junior. Most recently the Company launched five additional HD channels including SPACE, BNN, Bravo!, Discovery Channel and Animal Planet. Shaw now has approximately 965,000 HD capable customers.

During the quarter in pursuit of Shaw's continued improvement for its approximately 1.9 million Internet customers, the Company announced as part of its Wi-Fi strategy a technical trial of HotSpot 2.0 in conjunction with Cisco Systems ("Cisco"), Shaw's Wi-Fi technology partner. HotSpot 2.0 provides a significant improvement in Wi-Fi accessibility and security, and allows Shaw's broadband Wi-Fi enabled customers to automatically connect and authenticate to the Wi-Fi network. HotSpot 2.0 also enables encryption ensuring that Wi-Fi access is secure and customers' data is protected. On December 6, the Company launched the trial of its Wi-Fi network with a limited number of locations in Calgary, Edmonton and Vancouver. Hundreds of access points will be added in the coming months, with thousands of locations being activated across the Shaw footprint over the next three years.

Subscriber Statistics

Three months ended November 30, 2011 ------------------------- November August 31, Change 30, 2011 2011 Growth % ---------------------------------------------------------------------------- CABLE: Basic service: Actual 2,267,007 2,289,775 (22,768) (1.0) Penetration as % of homes passed 58.2% 59.0% Digital customers 1,878,954 1,819,388 59,566 3.3 ---------------------------------------------------------------------------- INTERNET: Connected and scheduled 1,887,916 1,877,231 10,685 0.6 Penetration as % of basic 83.3% 82.0% Standalone Internet not included in basic cable 210,261 217,068 (6,807) (3.1) DIGITAL PHONE: Number of lines (1) 1,256,010 1,233,041 22,969 1.9 ---------------------------------------------------------------------------- 1. Represents primary and secondary lines on billing plus pending installs.

SATELLITE (DTH and Satellite Services)

FINANCIAL HIGHLIGHTS

Three months ended November 30, ----------------------------------------------- Change 2011 2010 % ----------------------------------------------- ($millions Cdn) Revenue DTH (Shaw Direct) 189 185 2 Satellite Services 20 21 (5) ---------------------------------------------------------------------------- 209 206 1 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Operating income before amortization (1) DTH (Shaw Direct) 59 59 - Satellite Services 10 10 - ---------------------------------------------------------------------------- 69 69 - Capital expenditures and equipment costs (net): Success based (2) 23 23 - Buildings and other 2 1 100 ---------------------------------------------------------------------------- Total as per Note 3 to the unaudited interim condensed Consolidated Financial Statements 25 24 4 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Operating margin (1) 33.0% 33.5% (0.5) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- 1. See definitions and discussion under Key Performance Drivers in MD&A. 2. Net of the profit on the sale of satellite equipment as it is viewed as a recovery of expenditures on customer premise equipment.

Operating Highlights

-- During the quarter Shaw Direct had a net gain of 531 customers and as at November 30, 2011 DTH customers total 909,414.

Revenue of $209 million for the three month period was up 1% over the same period last year. The improvement was primarily due to price changes. Operating income before amortization of $69 million in the current period was in line with the comparable quarter.

Operating income before amortization declined $3 million compared to the fourth quarter primarily due to higher programming costs and employee related costs, mainly due to annual merit increases.

Total capital investment of $25 million for the quarter compared to $24 million in the same period last year.

During the quarter Shaw Direct launched 8 new HD channels including TVA Sports, RDS 2, TSN JETS and new NHL Centre Ice and NFL Sunday Ticket channels and as at November 30, 2011 offered almost 90 HD channels to over 500,000 HD customers. Shaw Direct's core offer now includes receivers that are HD and MPEG 4 technology capable allowing for additional channels to be added with existing satellite capacity.

Subscriber Statistics

Three months ended November 30, 2011 ------------------------- November 30, August 31, Change 2011 2011 Growth % --------------------------------------------------- DTH customers (1) 909,414 908,883 531 - ---------------------------------------------------------------------------- 1. Including seasonal customers who temporarily suspend their service.

MEDIA

FINANCIAL HIGHLIGHTS

October 27, Three months 2011 to ended November November 30, Change 30, 2011 2010 % --------------------------------------------- ($millions Cdn) Revenue greater than 299 125 100 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Operating income before greater than amortization (1) 120 57 100 Capital expenditures: Broadcast and transmission greater than 3 1 100 Buildings and other greater than 3 1 100 ---------------------------------------------------------------------------- Total as per Note 3 to the unaudited interim condensed Consolidated greater than Financial Statements 6 2 100 ---------------------------------------------------------------------------- Other adjustments: CRTC benefit obligation greater than funding (10) (2) 100 Non-controlling interests greater than (11) (4) 100 Operating margin(1) 40.1% 45.6% (5.5) ---------------------------------------------------------------------------- 1. See definitions and discussion under Key Performance Drivers in MD&A.

Operating Highlights

Revenue in the Media division was $299 million for the quarter and operating income before amortization was $120 million. Advertising revenue in the quarter was driven by strength in the government, media, and alcohol beverages categories. For informational purposes, on a comparative basis to a full quarter last year, Media revenues were down 3% and operating income before amortization decreased 8%, reflecting the softening of the advertising market as a result of the economic uncertainty.

Compared to the fourth quarter of fiscal 2011, revenue and operating income before amortization improved $90 million and $108 million, respectively. The increases were primarily due to the cyclical nature of the Media business, with higher advertising revenues in the first quarter driven by high demand and the fall launch of season premieres.

Global's returning line-up delivered solid results this fall with House, Hawaii 5-0, Glee, NCIS, NCIS LA, Survivor and Bones all coming back as top 20 performers. Upcoming mid-season premieres include new programs such as The Firm, The Finder, Bomb Girls, and Touch. Several news initiatives were launched this quarter including Sunday morning's "The West Block" program, with Prime Minister Harper as the first guest, and the launch of Global TV Morning News shows in Toronto, Regina and Saskatoon. In the upcoming quarter, the Media division will be launching Global National Mandarin, the first Mandarin language newscast produced by a national network in Canada.

Media's Specialty schedule continued to deliver strong results in the quarter with History, Food Network and Showcase delivering shows in the top 25 entertainment specialty programs.

Capital investment in the quarter continued on various projects and focused on upgrading production equipment and continued improvements to the network infrastructure.

OTHER INCOME AND EXPENSE ITEMS

Amortization

Three months ended November 30, ----------------------------------------------- Change 2011 2010 % ---------------------------------------------------------------------------- ($millions Cdn) Amortizationrevenue (expense) - Deferred equipment revenue 28 27 4 Deferred equipment costs (53) (52) 2 Property, plant and equipment, intangibles and other (169) (155) 9 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------

Amortization increased over the comparable period as the amortization of new expenditures for property, plant and equipment and other intangibles and inclusion of the Media division for the full quarter in the current year exceeded the impact of assets that became fully depreciated.

Amortization of financing costs and Interest expense

Three months ended November 30, ----------------------------------------------- Change 2011 2010 % ---------------------------------------------------------------------------- ($millions Cdn) Amortization of financing costs - long-term debt 1 1 - Interest expense 82 69 19 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------

Interest expense increased over the comparative period due to a higher debt level mainly as a result of the Media acquisition in October 2010. Approximately $1 billion was required to complete the transaction including repayment of a term loan and breakage of related currency swaps.

CRTC benefit obligation

As part of the CRTC decision approving the Media acquisition during the first quarter of 2011, the Company is required to contribute approximately $180 million in new benefits to the Canadian broadcasting system over the following seven years. The fair value of the obligation of $139 million was recorded in the income statement.

Business acquisition, integration and restructuring expenses

During the first quarter of 2011, the Company recorded $58 million of costs in respect of the acquisition of the broadcasting business of Canwest and organizational restructuring. Amounts included acquisition related costs to effect the acquisition, such as professional fees paid to lawyers and consultants. The integration and restructuring costs related to integrating the new businesses and increasing organizational effectiveness for future growth as well as package costs for the former CEO of Shaw.

Loss on derivative instruments

For derivative instruments where hedge accounting is not permissible or derivatives are not designated in a hedging relationship, the Company records changes in the fair value of derivative instruments in the income statement. A loss of $1 million was recorded in the comparative quarter in respect of such derivative instruments.

Accretion of long-term liabilities and provisions

The Company records accretion expense in respect of the discounting of certain long-term liabilities and provisions which are accreted to their estimated value over their respective terms. The expense is primarily in respect of CRTC benefit obligations as well as the liability which arose in 2010 when the Company entered into amended agreements with the counterparties to certain cross-currency agreements to fix the settlement of the principal portion of the swaps in December 2011. Accretion expense has increased over the prior year as the comparative quarter only includes the CRTC obligations for approximately one month.

Foreign exchange gain on unhedged long-term debt

In conjunction with the Media business acquisition in October 2010, the Company assumed a US $390 million term loan and US $338 million senior unsecured notes. Shortly after closing the acquisition, the Company repaid the term loan including breakage of the related cross currency interest rate swaps. As a result of fluctuations of the Canadian dollar relative to the US dollar, a net foreign exchange gain of $3 million was recorded in the first quarter of the prior year.

Other gains

This category generally includes realized and unrealized foreign exchange gains and losses on US dollar denominated current assets and liabilities, gains and losses on disposal of property, plant and equipment and the Company's share of the operations of Burrard Landing Lot 2 Holdings Partnership.

Income taxes

Income taxes increased over the comparative period due to higher net income before income taxes.

Equity income from associates

During the prior quarter, the Company recorded income of $14 million primarily in respect of its 49.9% equity interest in CW Media Investments Co. ("CW Media") for the period September 1 to October 26, 2010. On October 27, 2010, the Company acquired the remaining equity interest in CW Media as part of its purchase of all the broadcasting assets of Canwest. Results of operations are consolidated effective October 27, 2010.

RISKS AND UNCERTAINTIES

The significant risks and uncertainties affecting the Company and its business are discussed in the Company's August 31, 2011 Annual Report under the Introduction to the Business - Known Events, Trends, Risks and Uncertainties in Management's Discussion and Analysis.

FINANCIAL POSITION

Total assets at November 30, 2011 were $12.7 billion compared to $12.6 billion at August 31, 2011. Following is a discussion of significant changes in the consolidated statement of financial position since August 31, 2011.

Current assets increased $66 million primarily due to increases in accounts receivable of $108 million, inventories of $23 million and other current assets of $30 million all of which were partially offset by decreases in cash of $80 million and assets held for sale of $15 million. Accounts receivable were up primarily due to an increase in advertising revenue during the first quarter and higher equipment shipments to retailers. Other current assets were up primarily as a result of increases in program rights and advances and prepaid maintenance and support contracts while inventories were higher due to timing of equipment purchases to ensure sufficient supply for the holiday season. Cash decreased as the cash outlay for investing and financing activities exceeded the funds provided by operations. Assets held for sale decreased as the sale of the wireless assets was completed during the first quarter.

Property, plant and equipment increased $30 million as current year capital investment exceeded amortization.

Other long-term assets were up $47 million due to an increase in deferred equipment costs.

Intangibles increased $19 million due to higher program rights. Program rights and advances (current and noncurrent) increased as advances and additional investment in acquired rights exceeded the amortization for the current quarter.

Current liabilities were up $481 million due to increases in income taxes payable of $26 million and current portion of long-term debt of $449 million. Income taxes payable increased due to the current quarter provision partially offset by tax installment payments. The current portion of long-term debt increased and long-term debt decreased due to the reclassification of the 6.1% $450 million senior notes which are due in November 2012.

Deferred credits were up $13 million due to an increase in deferred equipment revenue.

Deferred income tax liabilities, net of deferred income tax assets, decreased $7 million due to the current quarter recovery.

Shareholders' equity increased $124 million due to increases in share capital of $33 million and retained earnings of $87 million. Share capital increased due to the issuance of 1,622,472 Class B Non-Voting Shares under the Company's option plan and Dividend Reinvestment Plan ("DRIP"). As of December 31, 2011, share capital is as reported at November 30, 2011 with the exception of the issuance of a total of 442,887 Class B Non-Voting Shares under the DRIP and upon exercise of options under the Company's option plan subsequent to the quarter end. Retained earnings increased due to current quarter earnings of $192 million partially offset by dividends of $105 million.

LIQUIDITY AND CAPITAL RESOURCES

In the current quarter, the Company generated $119 million of free cash flow. Shaw used its free cash flow along with cash of $80 million and proceeds on issuance of Class B Non-Voting Shares of $7 million to fund the net change in working capital requirements and inventory of $91 million, pay common share dividends of $76 million, invest an additional net $37 million in program rights and fund other items totaling $2 million.

On November 29, 2011 Shaw received the approval of the TSX to renew its normal course issuer bid to purchase its Class B Non-Voting Shares for a further one year period. The Company is authorized to acquire up to 20,000,000 Class B Non-Voting Shares during the period December 1, 2011 to November 30, 2012.

The Company issues Class B Non-Voting Shares from treasury under its DRIP which resulted in cash savings and incremental Class B Non-Voting Shares of $25 million during the current quarter.

Based on available credit facilities and forecasted free cash flow, the Company expects to have sufficient liquidity to fund operations and obligations during the current fiscal year. On a longer-term basis, Shaw expects to generate free cash flow and have borrowing capacity sufficient to finance foreseeable future business plans and refinance maturing debt.

CASH FLOW

Operating Activities

Three months ended November 30, ----------------------------------------------- Change 2011 2010 % ---------------------------------------------------------------------------- ($millions Cdn) Funds flow from continuing operations 356 265 34 Net increase in non-cash working capital balances related to continuing operations (47) (200) (77) ---------------------------------------------------------------------------- greater than 309 65 100 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------

Funds flow from continuing operations increased over the comparative quarter due to the combined impact of higher operating income before amortization adjusted for non-cash program rights expenses in the current quarter and charges in the prior year for termination of swap contracts and business acquisition, integration and restructuring expenses partially offset by higher interest, current income taxes and program rights purchases in the current year. The net change in non-cash working capital balances related to continuing operations fluctuated over the comparative period due to the seasonal advertising impact on accounts receivable and the timing of payment of income taxes payable.

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