Shaw 2012 Annual Report Download - page 40

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012
Shaw manages its exposure to floating interest rates through maintaining a balance of fixed and
floating rate debt. To mitigate some of the foreign exchange uncertainty with respect to capital
expenditures, the Company regularly enters into forward contracts in respect of US dollar
commitments. In order to minimize the risk of counterparty default under its swap agreements,
Shaw assesses the creditworthiness of its swap counterparties. Currently 100% of the total
swap portfolio is held by a financial institution with Standard & Poor’s ratings ranging from A+
to A-1. Further information concerning the policy and use of derivative financial instruments is
contained in Notes 2 and 28 to the Consolidated Financial Statements.
iv) Litigation
The Company and its subsidiaries are involved in litigation matters arising in the ordinary
course and conduct of its business. Although management does not expect that the outcome of
these matters will have a material adverse effect on the Corporation, there can be no assurance
that these matters, or other matters that arise in the future, will not have an adverse effect on
the Corporation’s business and operating results.
v) Uninsured risks of loss
The Company presently relies on two satellites (Anik F2 and Anik F1R) owned by Telesat
Canada (“Telesat”) to conduct its DTH and Satellite Services business. The Company has also
secured a dedicated payload (16 transponders plus 5 spares) on Telesat’s soon to be launched
Anik G1 satellite (projected in service date in early calendar 2013). The Company owns certain
transponders on Anik F2 and has long-term capacity service agreements in place in respect of
transponders on Anik F1R, Anik F2 and Anik G1. As the satellite owner, Telesat maintains
insurance policies on each of these satellites. In the case of Anik F1R and Anik F2, Shaw funds
a portion of the insurance cost such that in the event Telesat recovers insurance proceeds in
connection with an insured loss, Shaw will be entitled to receive certain compensation
payments from Telesat. The Company expects that Telesat will renew the insurance policies in
respect of Anik F1R and Anik F2 and that Shaw will continue to contribute to the cost of these
policies while they are in effect. In the case of Anik G1, Telesat will maintain insurance, at
minimum, for the launch and first five years of in orbit operation. Shaw maintains a security
interest in the transponder capacity and any insurance proceeds related thereto. The Company
does not maintain business interruption insurance covering damage or loss to one or more of
the satellites used in its DTH and Satellite Services business as it believes the premium costs
are uneconomic relative to the risk of satellite failure. Transponder capacity is available to the
Company on an unprotected, non-preemptible service level basis, in both the case of the Anik
F2 transponders that are owned by Shaw and the Anik F1R and Anik F2 transponders that are
secured through service capacity agreements. The Company has priority access to spare
transponders on Anik F1R and Anik F2 in the case of interruption, although there is no
assurance that such transponders would be available. In the event of satellite failure, service
will only be restored as additional capacity becomes available. Restoration of satellite service on
another satellite may require repositioning or re-pointing of customers’ receiving dishes. As a
result, the customers’ level of service may be diminished or they may require a larger dish. The
Anik G1 satellite has a switch feature that allows the whole channel services (transponders and
available spares) to be switched from extended Ku-band to Ku-band, which does provide the
Company with limited back-up to restore failed whole channel services on Anik F1R. Satellite
failure could cause customers to deactivate their DTH subscriptions or otherwise have a
material adverse effect on business and results of operations.
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