Shaw 2011 Annual Report Download - page 46

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2011
limited to a localized geographic area and therefore resulting business interruption and
financial damages would be limited. Further, the Company has back-up disaster recovery plans
in the event of plant failure and redundant capacity with respect to certain portions of the
system. In the past, it has successfully recovered from damages caused by natural disasters
without significant cost or disruption of service. Although the Company has taken steps to
reduce this risk, there can be no assurance that major disruptions will not occur.
v) Reliance on suppliers
Shaw’s distribution and call center network is connected to or relies on other
telecommunication carriers and certain utility companies. Any of the events described in the
preceding paragraph, as well as labour strikes and other work disruptions, bankruptcies,
technical difficulties or other events affecting these carriers or utilities could also hurt business,
including customer relationships and operating results.
The Company sources its customer premise and capital equipment and capital builds from
certain key suppliers. While the Company has alternate sources for most of its purchases, the
loss of a key supplier could adversely affect the Company in the short term.
vi) Programming expenses
Shaw’s programming expenses for cable and DTH continue to be one of the most significant
single expense items. Costs continue to increase, particularly for sports programming. In
addition as the Company adds programming or distributes existing programming to more of the
subscriber base programming expenses increase. Although the Company has been successful at
reducing the impact of these increases through sale of additional services or increasing
subscriber rates, there can be no assurance that this will continue and operating results may be
impacted.
In Media one of the most significant expenses is also programming costs. Increased
competition in the television broadcasting industry, developments affecting producers and
distributors of programming content, changes in viewer preferences and other developments
could impact both the availability and cost of programming content. Although the Corporation
has processes to effectively manage these costs, programming content may be purchased for
broadcasting one to two years in advance, making it more difficult to predict how such content
will perform.
vii) Unionized labour
Approximately 50% of the Media division employees are unionized and are employed under a
total of five collective agreements. If labour disruptions occur, it is possible that they may
involve large numbers of employees and possibly cause a disruption to the Media business. The
risk is currently mitigated as all collective agreements have been renewed and are in effect for
the next two to four years.
viii) Holding company structure
Substantially all of Shaw’s business activities are operated by its subsidiaries. As a holding
company, the Company’s ability to meet its financial obligations is dependent primarily upon
the receipt of interest and principal payments on intercompany advances, management fees,
cash dividends and other payments from its subsidiaries together with proceeds raised by the
Company through the issuance of equity and the incurrence of debt, and from proceeds
received on the sale of assets. The payment of dividends and the making of loans, advances
and other payments to the Company by its subsidiaries may be subject to statutory or
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