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Shaw Announces Fourth Quarter and Full Year Results and Preliminary Fiscal 2012 Guidance

(October 20, 2011)

CALGARY, ALBERTA -- (Marketwire) -- 10/20/11 -- Shaw Communications Inc. (TSX:SJR.B) (NYSE:SJR) announced results for the fourth quarter and year ended August 31, 2011. Consolidated revenue for the three and twelve month periods of $1.18 billion and $4.74 billion, respectively, was up 26% and 28% over the comparable periods last year. Total operating income before amortization(1)of $476 million and $2.03 billion, respectively, improved 12% and 15% over the same periods last year. Free cash flow(1) for the three and twelve month periods was $49 million and $603 million, respectively, compared to $69 million and $515 million for the comparable periods.

Chief Executive Officer Brad Shaw said, "Fiscal 2011 was a year in which we undertook important steps to be more operationally efficient and financially stronger. I am pleased to report we ended the year meeting all of our financial commitments. Our performance in the fourth quarter was highlighted by solid operating income growth in the Cable division and margin improvement."

Mr. Shaw continued "This was a year of significant change including the completion of the strategic acquisition of our new Media assets, our senior leadership transition, the start of our digital network upgrade, our broadband leadership initiatives including our Wi-Fi build, and our decision to not pursue a conventional wireless business. Shaw is a dynamic company, a successful operator, and a technology leader. We continue to leverage our broadband network and, with our focus on providing an exceptional customer experience, are driven to deliver new and innovative products and services. We recently announced our plans to build a managed Wi-Fi network to extend our customers broadband experience beyond their homes. Customers are actively seeking Wi-Fi hotspots to reduce data costs and improve their wireless broadband experience. Shaw will become the first service provider in Canada to deliver secure and reliable wireless broadband through an extensive Wi-Fi network covering thousands of locations."

"Our Media business has proven to be a key strategic asset and very attractive acquisition. The division performed extremely well this year, showcasing its leading portfolio of specialty channels and conventional programming and benefitting from the recovery in the advertising market. During the year we also continued to strengthen our capital structure and lower costs, taking advantage of favorable market conditions. We issued $1.3 billion in debt and $300 million in preferred equity using a portion of the proceeds to refinance higher cost debt assumed in the Canwest acquisition. We also continued to focus on returning value to our shareholders and paid almost $400 million in dividends. The initiatives we undertook this past year, and decisions we executed on, have positioned us well to move forward in this rapidly evolving competitive landscape."


Net income from continuing operations of $166.2 million or $0.37 per share for the quarter ended August 31, 2011 compared to $123 million or $0.28 per share for the same period last year. Net income from continuing operations for the annual period was $562 million or $1.24 per share compared to $534 million or $1.23 per share last year. All periods included non-operating items which are more fully detailed in Management's Discussions and Analysis (MD&A).(2) The current year-to-date period included a charge of $139 million for the discounted value of the $180 million CRTC benefit obligation related to the acquisition of Shaw Media, as well as business acquisition, integration and restructuring expenses of $91 million. The prior twelve month period included debt retirement costs and amounts related to financial instruments of $82 million and $45 million, respectively. Excluding the non-operating items, net income from continuing operations for the three and twelve month periods ended August 31, 2011 would have been $147 million and $696 million respectively, compared to $133 million and $614 million in the same periods last year.

Revenue in the Cable division was up almost 6% for each of the three and twelve month periods, respectively, to $784 million and $3.10 billion. The improvement was primarily driven by price changes and growth. Operating income before amortization for the quarter of $392 million was up 10% over the comparable quarter. Excluding the one-time CRTC Part II fee recovery last year, operating income before amortization for the annual period increased over 6% to $1.49 billion.

In the Satellite division revenue was $208 million and $828 million for the three and twelve month periods, respectively, up 3% over each of the comparable periods. Operating income before amortization for the current quarter of $72 million improved almost 5% over the same period last year. Excluding the one-time Part II fee recovery, operating income before amortization for the annual period of $288 million improved 3% over last year.

Quarterly revenue and operating income before amortization in the Media division was $209 million and $12 million, respectively. Revenue and operating income before amortization for the period from October 27, 2010 to August 31, 2011 was $891 million and $252 million, respectively. For informational purposes, on a comparative basis to last year, Media revenues for the full twelve month period were up approximately 7% to $1.07 billion and operating income before amortization, excluding the impact of the one-time Part II fee recovery last year, improved 25% to $325 million.

Shaw completed its review of the wireless strategic initiative and concluded that the economics as a new entrant would be extremely challenging, even with the Company's established base and considerable strengths and assets. Shaw has decided not to pursue a conventional wireless build and instead plans to focus on initiatives that align with leveraging its Media and programming assets and strengthening its leadership position in broadband and video. Excluding spectrum licenses, all assets which are not re-deployable or held for resale have been written off in the fourth quarter.

In August Shaw redeemed all of its outstanding 13.5% senior notes due 2015. The notes had a face value of US $260.4 million.

Looking forward Mr. Shaw said, "We are starting the new fiscal year with a number of strategic initiatives on the agenda including our digital network upgrade and Wi-Fi build. We expect continued growth in revenue and operating income before amortization across all divisions in 2012. Investment in our various strategic initiatives is expected to increase capital over 2011 spend levels, excluding wireless. Combined with higher CRTC benefit obligation funding and cash taxes, we expect free cash flow to decline moderately to approximate $550 million."

In closing Brad Shaw stated, "We look forward to the challenges and opportunities ahead. We have the resources, the creativity, and the drive to successfully execute on our fiscal 2012 strategic business priorities building value for our shareholders."

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

AUGUST 31, 2011

October 20, 2011

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 should also be read in conjunction with Management's Discussion and Analysis included in the Company's August 31, 2010 Annual Report including the Consolidated Financial Statements and the Notes thereto and the unaudited interim Consolidated Financial Statements and the Notes thereto of the current quarter.

CONSOLIDATED RESULTS OF OPERATIONS

FOURTH QUARTER ENDING AUGUST 31, 2011

Selected Financial Highlights

Three months ended Year ended August 31, August 31, ------------------------------------------------------------ Change Change 2011 2010 % 2011 2010 % ---------------------------------------------------------------------------- ($000's Cdn except per share amounts) Operations: Revenue 1,180,699 938,872 25.8 4,740,903 3,717,580 27.5 Operating income before amortization (1) 476,229 424,458 12.2 2,030,828 1,760,147 15.4 Operating margin (1) (2) (3) 40.3% 45.2% (4.9) 42.8% 45.3% (2.5) Funds flow from continuing operations (4) 358,391 328,741 9.0 1,443,179 1,376,799 4.8 Net income from continuing operations 166,237 122,551 35.6 562,052 533,776 5.3 Per share data: Earnings per share - basic and diluted From continuing operations 0.37 0.28 1.24 1.23 Weighted average participating shares outstanding during period (000's) 436,467 432,913 434,881 432,675 ---------------------------------------------------------------------------- 1. See definition and discussion under Key Performance Drivers. 2. Operating margin is adjusted to exclude the one-time CRTC Part II recovery for the year ended August 31, 2010. Including the one-time CRTC Part II recovery, the operating margin would be 47.3%. 3. Operating margin has declined in the three and twelve month periods compared to last year mainly due to the inclusion of the new Media segment. 4. 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 Total August 31, Year ended August 31, ---------- --------------------- --------------------- August 31, 2011 2011 2010 2011 2010 ------------------------------- -------------------------------------------- Subscriber statistics: Basic cable customers 2,289,775 (16,207) 2,559 (50,988) 2,410 Digital customers 1,819,388 49,548 54,946 166,369 328,841 Internet customers (including pending installs) 1,877,231 13,528 21,374 54,217 110,012 Digital phone lines (including pending installs) 1,233,041 22,776 51,896 136,534 234,402 DTH customers 908,883 806 831 3,087 4,855 ---------------------------------------------------------------------------- Additional Highlights -- Revenue of $1.18 billion and $4.74 billion for the three and twelve month periods improved 25.8% and 27.5% over the comparable periods last year. -- Free cash flow(1) for the quarter was $49.0 million bringing the annual total to $603.0 million compared to $69.3 million and $515.1 million, respectively, for the same periods last year. -- During the quarter Shaw redeemed all of its outstanding US$ 13.5% senior notes due 2015 having a face value of US $260.4 million. -- Shaw recently announced its intent to provide a managed Wi-Fi network that will extend a customer's broadband experience beyond their home.

Consolidated Overview

Consolidated revenue of $1.18 billion and $4.74 billion for the three and twelve month periods, respectively, improved 25.8% and 27.5% over the same periods last year. The improvement was primarily due to the acquisition of Shaw Media, as well as price changes and growth in the Cable and Satellite divisions.

Consolidated operating income before amortization for the three and twelve month periods of $476.2 million and $2.03 billion, respectively, increased 12.2% and 15.4% over the same periods last year. Both periods benefitted from the acquisition of Shaw Media as well as core revenue related growth, partially offset by higher programming costs and increased sales and marketing. Employee related costs were up on a full year basis and generally even in the current quarter, benefitting from the restructuring initiatives completed earlier this year. The current annual period also included the impact of the retroactive support structure rate increases and the prior year benefitted from a one-time CRTC Part II fee recovery of $75.3 million.

Net income from continuing operations was $166.2 million and $562.1 million for the three and twelve months ended August 31, 2011, respectively, compared to $122.6 million and $533.8 million for the same periods last year. Non-operating items affected all periods. The current year-to-date period included a charge of $139.1 million for the discounted value of the $180.0 million CRTC benefit obligation, net of incremental revenues, related to the Media acquisition, as well as business acquisition, integration and restructuring expenses of $90.6 million. The prior year-to-date period included debt retirement costs and amounts related to financial instruments of $81.6 million and $47.3 million, respectively. Outlined below are further details on these and other operating and non-operating components of net income for each period.

(1) See definition and discussion under Key Performance Drivers

Year ended ---------------- ($000's Cdn) August 31, Operating net 2011 of interest Non-operating ---------------------------------------------------------------------------- Operating income 1,294,841 Amortization of financing costs - long-term debt (4,302) Interest expense - debt (331,584) ---------------------------------------------------------------------------- Operating income after interest 958,955 958,955 - Debt retirement costs - - - Gain on redemption of debt 32,752 - 32,752 CRTC benefit obligation (139,098) - (139,098) Business acquisition, integration and restructuring expenses (90,648) - (90,648) Loss on derivative instruments (22,022) - (22,022) Accretion of long-term liabilities (14,975) - (14,975) Foreign exchange gain on unhedged long-term debt 16,695 - 16,695 Other gains 11,022 - 11,022 ---------------------------------------------------------------------------- Income (loss) before income taxes 752,681 958,955 (206,274) Current income tax expense (recovery) 209,649 239,600 (29,951) Future income tax expense (recovery) (4,820) 23,148 (27,968) ---------------------------------------------------------------------------- Income (loss) before following 547,852 696,207 (148,355) Equity income (loss) on investees 14,200 - 14,200 ---------------------------------------------------------------------------- Net income (loss) from continuing operations 562,052 696,207 (134,155) ---------------------------------------------------------------------------- Year ended ---------------- ($000's Cdn) August 31, Operating net 2010 of interest Non-operating --------------------------------------------------------------------------- Operating income 1,103,876 Amortization of financing costs - long-term debt (3,972) Interest expense - debt (248,011) --------------------------------------------------------------------------- Operating income after interest 851,893 851,893 - Debt retirement costs (81,585) - (81,585) Gain on redemption of debt - - - CRTC benefit obligation - - - Business acquisition, integration and restructuring expenses - - - Loss on derivative instruments (45,164) - (45,164) Accretion of long-term liabilities (2,142) - (2,142) Foreign exchange gain on unhedged long-term debt - - - Other gains 5,513 - 5,513 --------------------------------------------------------------------------- Income (loss) before income taxes 728,515 851,893 (123,378) Current income tax expense (recovery) 167,767 179,974 (12,207) Future income tax expense (recovery) 15,722 57,483 (41,761) --------------------------------------------------------------------------- Income (loss) before following 545,026 614,436 (69,410) Equity income (loss) on investees (11,250) - (11,250) --------------------------------------------------------------------------- Net income (loss) from continuing operations 533,776 614,436 (80,660) --------------------------------------------------------------------------- Three months ended ---------------- ($000's Cdn) August 31, Operating net 2011 of interest Non-operating ---------------------------------------------------------------------------- Operating income 290,298 Amortization of financing costs - long-term debt (1,096) Interest expense - debt (87,941) ---------------------------------------------------------------------------- Operating income after interest 201,261 201,261 - Gain on redemption of debt 22,771 - 22,771 Business acquisition, integration and restructuring expenses (405) - (405) Gain on derivative instruments 3,758 - 3,758 Accretion of long-term liabilities (4,113) - (4,113) Foreign exchange loss on unhedged long-term debt (6,681) - (6,681) Other gains (losses) 4,144 - 4,144 ---------------------------------------------------------------------------- Income (loss) before income taxes 220,735 201,261 19,474 Current income tax expense (recovery) 49,371 45,984 3,387 Future income tax expense (recovery) 5,238 7,863 (2,625) ---------------------------------------------------------------------------- Income (loss) before following 166,126 147,414 18,712 Equity income (loss) on investees 111 - 111 ---------------------------------------------------------------------------- Net income (loss) from continuing operations 166,237 147,414 18,823 ---------------------------------------------------------------------------- Three months ended ---------------- ($000's Cdn) August 31, Operating net 2010 of interest Non-operating -------------------------------------------------------------------------- Operating income 251,189 Amortization of financing costs - long-term debt (957) Interest expense - debt (62,504) -------------------------------------------------------------------------- Operating income after interest 187,728 187,728 - Gain on redemption of debt Business acquisition, integration and restructuring expenses - - - Gain on derivative instruments 619 - 619 Accretion of long-term liabilities (645) - (645) Foreign exchange loss on unhedged long-term debt - - - Other gains (losses) (2,829) - (2,829) -------------------------------------------------------------------------- Income (loss) before income taxes 184,873 187,728 (2,855) Current income tax expense (recovery) 40,435 22,969 17,466 Future income tax expense (recovery) 13,337 31,423 (18,086) -------------------------------------------------------------------------- Income (loss) before following 131,101 133,336 (2,235) Equity income (loss) on investees (8,550) - (8,550) -------------------------------------------------------------------------- Net income (loss) from continuing operations 122,551 133,336 (10,785) -------------------------------------------------------------------------- The changes in net income from continuing operations are outlined in the table below. August 31, 2011 net income from continuing operations compared to: ---------------------------------------------- Three months ended Year ended ----------------------------------------------- May 31, 2011 August 31, 2010 August 31, 2010 ---------------------------------------------------------------------------- (000's Cdn) Increased operating income before amortization (104,834) 51,771 270,681 Decreased (increased) amortization (7,713) (12,801) (80,046) Decreased (increased) interest expense 1,770 (25,437) (83,573) Change in net other costs and revenue (1) 55,619 30,990 (57,446) Decreased (increased) income taxes 17,398 (837) (21,340) ---------------------------------------------------------------------------- (37,760) 43,686 28,276 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (1) Net other costs and revenue includes debt retirement costs, gain on redemption of debt, the CRTC benefit obligation, business acquisition, integration and restructuring expenses, loss on derivative instruments, accretion of long-term liabilities, foreign exchange gain (loss) on unhedged long-term debt, other gains and equity income (loss) on investees as detailed in the unaudited interim Consolidated Statements of Income and Retained Earnings.

Basic earnings per share were $0.37 and $1.24 for the three and twelve months, respectively compared to $0.28 and $1.23 in the same periods last year. The improvement in the quarter was primarily due to increased operating income before amortization of $51.8 million and the change in net other costs and revenues of $31.0 million, the total of which was partially offset by increased interest and amortization of $25.4 million and $12.8 million, respectively. The change in net other costs and revenue was mainly due to a gain in the current period realized on the redemption of the US$ senior notes. The current annual period was up modestly over the prior year. Improved operating income before amortization of $270.7 million was reduced by higher interest, amortization, and income taxes of $83.6 million, $80.0 million, and $21.3 million, respectively. The change in net other costs and revenue of $57.4 million also reduced the current period and was primarily due to amounts related to the CRTC benefit obligation and various acquisition, integration and restructuring costs, partially offset by debt retirement costs and amounts related to financial instruments associated with the early redemption of the three series of US senior notes in the prior year. The prior twelve month period operating income before amortization included a one-time CRTC Part II fee recovery of $75.3 million which was offset in the current year by amounts related to Shaw Media and growth in the Cable and Satellite divisions.

Net income from continuing operations in the current quarter decreased $37.8 million compared to the third quarter of fiscal 2011 mainly due to reduced operating income before amortization of $104.8 million and increased amortization of $7.7 million, partially offset by the change in net other costs and revenue and lower income taxes of $55.6 million and $17.4 million, respectively. The decreased operating income before amortization was primarily due to the cyclical nature of the Media business, with lower advertising revenues in the summer months. The change in net other costs and revenue was primarily due to restructuring costs in the prior period.

Free cash flow for the quarter and annual period of $49.0 million and $603.0 million, respectively, compared to $69.3 million and $515.1 million in the same periods last year. The decline in the current quarter was mainly due to increased operating income before amortization in the Cable division, reduced by higher interest, taxes, and CRTC benefit obligation funding. The annual improvement was due to the Shaw Media acquisition and growth in the Cable and Satellite divisions, partially reduced by a one-time Part II fee recovery last year.

Shaw completed its review of the wireless strategic initiative and concluded that the economics as a new entrant would be extremely challenging, even with the Company's established base and considerable strengths and assets. Shaw has decided not to pursue a conventional wireless build and instead plans to focus on initiatives that align with leveraging its Media and programming assets and strengthening its leadership position in broadband and video. The Company intends to hold its wireless spectrum while it reviews all options.

Key Performance Drivers

The Company's continuous disclosure documents may provide discussion and analysis of non-GAAP financial measures. These financial measures do not have standard definitions prescribed by Canadian GAAP or US GAAP and therefore may not be comparable to similar measures disclosed by other companies. 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. These non-GAAP financial measures have not been presented as an alternative to net income or any other measure of performance required by Canadian or US GAAP.

The following contains a listing of non-GAAP financial measures used by the Company and provides a reconciliation to the nearest GAAP 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 and Retained Earnings. 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 for cable and satellite 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) and adjusted to exclude non-cash stock-based compensation expense.

With respect to the new Media segment, free cash flow has been determined as detailed above and in addition, Shaw has deducted cash amounts associated with funding the new and assumed CRTC benefit obligation related to the acquisition of Shaw Media as well as excluding the non-controlling interest amounts that are consolidated in the operating income before amortization, capital expenditure and cash tax amounts.

Free cash flow is calculated as follows: Three months ended August 31, Year ended August 31, ---------------------------------------------------------------------------- 2011 2010 (2) 2011 2010 (2) ---------------------------------------------------------------------------- ($000's Cdn) Cable free cash flow (1) 81,761 34,959 400,924 362,656 Satellite free cash flow (1) 2,700 34,363 104,762 152,484 Media free cash flow (1) (35,424) - 97,341 - ---------------------------------------------------------------------------- Free cash flow 49,037 69,322 603,027 515,140 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- 1. Reconciliations of free cash flow for cable, satellite and media are provided under "Cable - Financial Highlights", "Satellite - Financial Highlights" and "Media - Financial Highlights". 2. The presentation of segmented free cash flow has been adjusted to reflect on a gross basis to include intersegment transactions. As a result, Cable free cash flow has decreased and Satellite free cash flow has increased by $858 for the three month period and $3,398 for the twelve month period. CABLE FINANCIAL HIGHLIGHTS Three months ended August 31, Year ended August 31, ----------------------------- ------------------------------ Change Change 2011 2010 (3) % 2011 2010 (3) % ------------------------------------------------------------ ($000's Cdn) Revenue 783,551 742,471 5.5 3,095,456 2,931,976 5.6 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Operating income before amortization(1) 392,384 355,608 10.3 1,491,700 1,453,429 2.6 Capital expenditures and equipment costs (net): New housing development 22,757 15,838 43.7 88,066 78,451 12.3 Success based 58,156 62,594 (7.1) 206,897 222,246 (6.9) Upgrades and enhancement 91,674 105,403 (13.0) 277,543 289,421 (4.1) Replacement 14,350 24,245 (40.8) 47,371 66,393 (28.7) Buildings and other 35,940 47,663 (24.6) 88,940 100,574 (11.6) ---------------------------------------------------------------------------- Total as per Note 2 to the unaudited interim Consolidated Financial Statements 222,877 255,743 (12.9) 708,817 757,085 (6.4) ---------------------------------------------------------------------------- Free cash flow before the following 169,507 99,865 69.7 782,883 696,344 12.4 Less: Interest expense (61,261) (52,131) 17.5 (231,678) (213,898) 8.3 Cash taxes (29,500) (16,995) 73.6 (163,600) (136,000) 20.3 Other adjustments: Non-cash stock based compensation 3,015 4,220 (28.6) 13,319 16,210 (17.8) ---------------------------------------------------------------------------- Free cash flow(1) 81,761 34,959 133.9 400,924 362,656 10.6 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Operating margin(1) (2) 50.1% 47.9% 2.2 48.2% 47.9% 0.3 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- 1. See definitions and discussion under Key Performance Drivers. 2. Operating margin is adjusted to exclude the one-time CRTC Part II fee recovery in the twelve months ended August 31, 2010. Including the one- time CRTC Part II recovery, operating margin would be 49.6%. 3. The presentation of segmented free cash flow has been adjusted to include on a gross basis intersegment transactions. As a result, for the three month period revenue has increased by $1,032 and operating income before amortization and free cash flow have decreased by $858, for the twelve month period revenue has increased by $4,565 and operating income before amortization and free cash flow have decreased by $3,398. Operating Highlights -- Cable quarterly revenue and operating income before amortization of $783.6 million and $392.4 million, respectively, improved 5.5% and 10.3% over the comparable period last year. -- Digital customers increased 49,548 during the quarter to 1,819,388 and penetration of Basic is now 79.5%, up from 70.7% and 56.7% at August 31, 2010 and 2009, respectively. -- Digital Phone lines increased 22,776 during the three month period to 1,233,041 lines and Internet was up 13,528 to total 1,877,231 as at August 31, 2011. During the quarter Basic cable subscribers decreased 16,207. -- On June 30 the Company closed the acquisition of the cable system assets of Sun Country Cablevision Inc. located in the central interior of British Columbia.

Cable revenue for the three and twelve month periods of $783.6 million and $3.10 billion improved 5.5% and 5.6%, respectively, over the comparable periods last year. The quarter and year-to-date growth was driven by price changes and customer growth in Digital Phone and Internet partially offset by lower Basic subscribers and higher promotional activity.

Operating income before amortization of $392.4 million for the quarter improved 10.3% over the same period last year. The annual amount of $1.49 billion increased 6.2% over last year excluding the prior period one-time CRTC Part II fee recovery of $48.7 million. The revenue related growth in the quarter was partially reduced by higher programming costs. Employee related costs were consistent with the comparable quarterly period reflecting the benefit of the restructuring initiatives completed in late March. The annual improvement was driven by revenue related growth partially offset by increased employee related costs, programming, and marketing and sales expenses. Both the current three and twelve month periods were also impacted by the CRTC decision approving a retroactive rate increase in support structure charges by ILECs with the annual period including the impact of the retroactive increase and the current quarter reflecting the ongoing higher costs.

Revenue declined $1.1 million over the third quarter of fiscal 2011 primarily due to reduced Basic subscribers and seasonally lower On Demand revenues partially offset by customer price changes and decreased promotional activity. Operating income before amortization improved $4.6 million over this same period primarily due to lower various expenses.

Total capital investment of $222.9 million and $708.8 million for the quarter and annual periods decreased $32.9 million and $48.3 million, respectively, over the comparable periods last year. Success based capital declined $4.4 million and $15.3 million over the comparable three and twelve month periods mainly due lower purchases of digital phone customer premise equipment.

Investment in Upgrades and enhancement and Replacement categories combined decreased by $23.6 million and $30.9 million for the quarter and annual periods, respectively, compared to last year. Both the current periods included investment on the digital network upgrade which was more than offset by lower spending on Digital Phone infrastructure, Video enhancements, and automotive as compared to the prior periods.

Buildings and other decreased $11.7 million and $11.6 million, respectively, for the quarter and annual periods compared to the same periods last year mainly due to reduced investment in various facilities projects. The current periods also benefitted from proceeds on the sale of redundant real estate while the comparable periods included increased investment in certain corporate assets. These favorable variances were partially offset by higher spend related to back office and customer support systems in the current periods.

Spending in new housing development increased $6.9 million and $9.6 million over the comparable three and twelve month periods last year mainly due to higher activity as well as bulk stock purchasing in the current quarter.

On June 30 the Company closed the acquisition of the cable system assets of Sun Country Cablevision Inc. located in the central interior of British Columbia, adding approximately 6,500 Basic cable customers, including 2,100 Digital subscribers, and 4,000 Internet subscribers. These assets represent a complementary growth opportunity and will provide synergies with existing operations.

During the quarter Shaw commenced its digital network upgrade which converts analog tiers to digital, significantly increasing the capacity of the network for more Internet, HD and On Demand programming. The upgrade will increase the Digital customer footprint and is expected to be substantially complete early in fiscal 2013.

As at August 31, 2011 Shaw had 1,877,231 Internet customers which represents an 82% penetration of Basic. Shaw recently announced its intent to provide a managed Wi-Fi network that will extend a customer's broadband experience beyond their home. Wi-Fi is in virtually all portable consumer devices and customers are actively seeking Wi-Fi hotspots to reduce data costs and improve their wireless broadband experience. Shaw, working with Cisco, will become the first service provider in Canada to deliver secure, reliable wireless broadband in thousands of locations. During the quarter the Company also commenced construction of a new data centre in Calgary that will allow it to stay ahead of the technology curve and be able to handle new innovations as they come, such as the Wi-Fi network initiative. The data centre incorporates energy efficient cooling systems allowing Shaw to reduce the environmental impact. The centre is planned to be complete in the spring of 2014.

Shaw continued to grow its Digital customer base and penetration of Basic at August 31, 2011 was 79.5%, up from 70.7% at August 31, 2010. Shaw has approximately 910,000 HD capable customers. During the quarter, the Company expanded the availability of the Shaw Gateway, a new standard on connected entertainment.

Subscriber Statistics August 31, 2011 ----------------------------------- Three months ended Year ended ---------------------------------------- ------------------ ---------------- August August 31, Change Change 31, 2011 2010(1) Growth % Growth % ---------------------------------------- ----------------------------------- CABLE: Basic service: Actual 2,289,775 2,340,763 (16,207) (0.7) (50,988) (2.2) Penetration as % of homes passed 59.0% 61.4% Digital customers 1,819,388 1,653,019 49,548 2.8 166,369 10.1 ---------------------------------------------------------------------------- INTERNET: Connected and scheduled 1,877,231 1,823,014 13,528 0.7 54,217 3.0 Penetration as % of basic 82.0% 77.9% Standalone Internet not included in basic cable 217,068 234,877 (5,567) (2.5) (17,809) (7.6) DIGITAL PHONE: Number of lines (2) 1,233,041 1,096,507 22,776 1.9 136,534 12.5 ---------------------------------------------------------------------------- 1. August 31, 2010 figures are restated for comparative purposes as if the acquisition of several cable systems in British Columbia had occurred on that date. 2. Represents primary and secondary lines on billing plus pending installs. SATELLITE (DTH and Satellite Services) FINANCIAL HIGHLIGHTS Three months ended August 31, Year ended August 31, -------------------------- -------------------------- Change Change 2011 2010 (5) % 2011 2010 (5) % ----------------------------------------------------- ($000's Cdn) Revenue DTH (Shaw Direct) 187,506 180,624 3.8 745,350 721,952 3.2 Satellite Services 20,187 20,392 (1.0) 82,181 82,600 (0.5) ---------------------------------------------------------------------------- 207,693 201,016 3.3 827,531 804,552 2.9 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Operating income before amortization (1) DTH (Shaw Direct) 61,409 58,923 4.2 245,176 264,914 (7.5) Satellite Services 10,552 9,927 6.3 42,391 41,804 1.4 ---------------------------------------------------------------------------- 71,961 68,850 4.5 287,567 306,718 (6.2) Capital expenditures and equipment costs (net): Success based (3) 21,180 20,312 4.3 75,927 77,684 (2.3) Transponders 24,500 - 100.0 24,500 - 100.0 Buildings and other 3,251 2,033 59.9 6,396 7,927 (19.3) ---------------------------------------------------------------------------- Total as per Note 2 to the unaudited interim Consolidated Financial Statements 48,931 22,345 119.0 106,823 85,611 24.8 ---------------------------------------------------------------------------- Free cash flow before the following 23,030 46,505 (50.5) 180,744 221,107 (18.3) Less: Interest expense (2) (6,562) (6,563) - (25,952) (26,251) (1.1) Cash taxes (14,084) (6,000) 134.7 (51,400) (44,000) 16.8 Other adjustments: Non-cash stock based compensation 316 421 (24.9) 1,370 1,628 (15.8) ---------------------------------------------------------------------------- Free cash flow (1) 2,700 34,363 (92.1) 104,762 152,484 (31.3) ---------------------------------------------------------------------------- Operating Margin (4) 34.6% 34.3% 0.3 34.7% 34.8% (0.1) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- 1. See definitions and discussion under Key Performance Drivers. 2. Interest is allocated to the Satellite division based on the cost of debt incurred by the Company to repay Satellite debt and to fund accumulated cash deficits of Shaw Satellite Services and Shaw Direct. 3. Net of the profit on the sale of satellite equipment as it is viewed as a recovery of expenditures on customer premise equipment. 4. Operating margin is adjusted to exclude the one-time CRTC Part II fee recovery in the year ended August 31, 2010. Including the one-time CRTC Part II fee recovery, operating margin would be 38.1%. 5. The presentation of segmented free cash flow has been adjusted to include on a gross basis intersegment transactions. As a result, for the three month period revenue has increased by $3,583 and operating income before amortization and free cash flow have increased by $858. For the twelve month period revenue has increased by $14,383 and operating income before amortization and free cash flow have increased by $3,398. Operating Highlights -- Satellite quarterly revenue and operating income before amortization of $207.7 million and $72.0 million, respectively, improved 3.3% and 4.5% over the comparable period last year.

Revenue of $207.7 million and $827.5 million for the three and twelve month periods, respectively, was up 3.3% and 2.9% over the same periods last year. The improvement was primarily due to customer price changes. Operating income before amortization for the quarter of $72.0 million was up 4.5% over the same quarter last year. The revenue related growth was partially offset by higher programming, marketing and sales expenses. For the annual period, excluding the one-time Part II fee recovery of $26.6 million, operating income before amortization improved 2.6%.

Compared to the third quarter, operating income before amortization declined $3.9 million primarily due to increased marketing and sales expenses.

Total capital investment of $48.9 million and $106.8 million for the three and twelve month periods, respectively, increased over the comparable periods last year primarily due to the payment to Telesat in the current quarter related to the new Anik G1 satellite under construction. Shaw Direct has entered into agreements with Telesat to acquire capacity on the new satellite expected to be available early in fiscal 2013. The capacity will provide bandwidth for expanded customer choice, including new HD and other advanced services. Customer satellite dishes recently began to be deployed with new outdoor equipment which will be capable of receiving signals from three satellites, including Anik G1.

During the quarter, Shaw Direct launched a new entry level HD receiver. With this addition, all new receivers are HD and MPEG-4 technology capable which allows for additional channels to be added with existing satellite capacity. Shaw Direct also began broadcasting in MPEG-4 during the quarter and launched 13 new channels, including a number of key local services.

Subscriber Statistics August 31, 2011 ------------------------------------ Three months ended Year ended ------------------ ----------------- August 31, August 31, Change Change 2011 2010 Growth % Growth % ----------------------------------------------------------- DTH customers (1) 908,883 905,796 806 0.1 3,087 0.3 ---------------------------------------------------------------------------- 1. Including seasonal customers who temporarily suspend their service. MEDIA FINANCIAL HIGHLIGHTS October 27, Three months 2010 to ended August August 31, 31, 2011 2011 (3) ------------------------------ ($000's Cdn) Revenue
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