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Shaw Announces Second Quarter and Year-to-date Results

CALGARY, ALBERTA — (Marketwired) — 04/14/16 — Shaw Communications Inc. (TSX: SJR.B)(NYSE: SJR) announces consolidated financial and operating results for the quarter ended February 29, 2016. Revenue from continuing operations for the quarter and year-to-date of $1.15 billion and $2.30 billion increased 3.0% and 3.4% over the comparable periods, respectively. Operating income before restructuring costs and amortization(1) for the quarter and year-to-date of $502 million and $1.01 billion improved 0.8% and 2.5% over the comparable periods, respectively.

Chief Executive Officer, Brad Shaw said, “We have successfully closed the acquisition of WIND Mobile (“WIND”) on March 1, 2016 and the disposition of Shaw Media Inc. (“Shaw Media”) on April 1, 2016. We believe these two transformative transactions better position Shaw for growth over the long term. With the acquisition of WIND and with our customers– connectivity needs at the heart of the strategic decisions we make, we are combining the power of our fibre, coax, WiFi and wireless networks to deliver a seamless experience of anytime and anywhere connectivity for our customers.”

Basis of presentation

The Company sold Shaw Media to Corus Entertainment Inc. (“Corus”) for consideration of approximately $2.65 billion which is comprised of $1.85 billion in cash and 71,364,853 Corus Class B non-voting participating shares issued at $11.21 per share. Given the announcement of the sale occurred in the second quarter, the assets, liabilities, operating results and operating cash flows for Shaw Media in the current and comparable periods are presented as discontinued operations – separate from the Company–s continuing operations.

Selected Financial Highlights

“The core of our business continues to show solid results despite the economic challenges that some of our customers are facing in parts of western Canada. We remain committed to operational excellence as we build on this foundation to transform Shaw into a leading pure-play connectivity provider,” said Mr. Shaw.

Net income for the quarter was $164 million or $0.32 per share relative to $168 million or $0.34 per share for the comparable period. Net income for the six month period was $382 million or $0.75 per share compared to $395 million or $0.81 per share for the comparable period. The current periods included transaction costs associated with the WIND acquisition, higher amortization and a greater equity loss related to some of our investments, which were partially offset by higher operating income from continuing operations and higher income from discontinued operations, net of tax. The prior period also included income related to a distribution from a venture capital fund investment.

Consolidated free cash flow(1) for the three and six month periods of $119 million and $291 million, respectively, as compared to $169 million and $362 million for the comparable periods. The reduction for the quarter and year-to-date was largely due to higher planned capital expenditures which were partially offset by higher operating income before restructuring costs and amortization(1) and lower cash taxes.

For Consumer, revenue generating units (“RGU”s) were 41,922 lower in the quarter, an improvement over the 43,750 RGUs loss in the first quarter of 2016 and 65,215 RGU losses in the second quarter of 2015. The current quarter change reflects losses of 14,473 phone lines with the continuing unbundling of phone services market wide, 6,002 satellite video RGUs, and 25,782 cable video RGUs which were partially offset by a 4,335 internet RGU gain.

“Providing our customers with choice, value and flexibility through innovation remains a top priority for us,” said Mr. Shaw. “Over the past few months, we have introduced a number of features for our video customers, including FreeRange TV, a market-leading cloud based X1 platform, unveiled in January 2016 that had over 210,000 account activations and more than 360,000 unique devices at March 31, 2016.”

Mr. Shaw added, “We continue to make progress on our Comcast video roadmap with the launch of FreeRange TV Web access on April 6, 2016. This product extends the FreeRange experience from a wireless mobile device to other connected devices such as laptops and SmartTVs. It is another example of how Shaw is changing the video landscape for our customers. As we continue to expand our next generation video services and enhance broadband performance through the deployment of DOCSIS 3.1, we remain committed to providing a leading experience for our customers.”

On February 16, 2016, Shaw launched Limited TV, an entry level plan that complements our menu of value-added video offerings. With Limited TV, Shaw was one of the first to meet the CRTC–s requirement for a “skinny basic package” ahead of their mandated timeline. Limited TV allows customers to subscribe to basic TV and choose from additional theme packs to build their own personalized TV package. Shaw continues to expand choice in video with the new two-year ValuePlans, hardware options, access to the most popular channels at competitive prices, FreeRange TV, shomi, CraveTV and the latest on-demand content.

“With WIND we have acquired immediate scale with a subscriber base of approximately 980,000, extensive spectrum, retail distribution, a wireless network that has a clear path to LTE and the opportunity to integrate that wireless network with our hybrid fibre-coax network and Shaw Go WiFi in a converged best-in-class network-of-networks,” said Mr. Shaw.

With the acquisition of WIND and disposition of Shaw Media, Shaw is revising its fiscal 2016 guidance. Shaw–s revised fiscal 2016 guidance for Consumer, Business Network Services and Business Infrastructure Services, combined, is for operating income before restructuring costs and amortization to range between flat to low single digit growth over fiscal 2015. Consolidated capital investment for Consumer, Business Network Services and Business Infrastructure Services, combined, is expected to be $995 million. The increase in expected capital spend reflects capital projects acquired in the INetU transaction and the effect of foreign exchange rates relative to plan. Shaw expects to provide consolidated fiscal 2017 guidance, including WIND, in its normal course.

Brad Shaw concluded, “As we move through the last half of the year and into fiscal 2017, we are excited about the opportunities ahead for all segments of the business. Shaw–s new asset profile has renewed our focus on growth while operational efficiencies will anchor our ability to be successful in a competitive marketplace.”

Shaw is a leading pure-play connectivity provider. Shaw serves consumers with broadband Internet, WiFi, video, digital phone and, through WIND Mobile, wireless services. Shaw Business Network Services provides business customers with Internet, data, WiFi, telephony, video and fleet tracking services. Shaw Business Infrastructure Services provides enterprises colocation, cloud and managed services through ViaWest. 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). For more information, please visit .

The accompanying Management–s Discussion and Analysis (“MD&A”) forms part of this news release and the “Caution concerning forward-looking statements” applies to all forward-looking statements made in this news release.

Advisories

The following Management–s Discussion and Analysis (“MD&A”), dated April 14, 2016, should be read in conjunction with the unaudited interim Consolidated Financial Statements and Notes thereto for the quarter ended February 29, 2016 and the 2015 Annual Consolidated Financial Statements, the Notes thereto and related MD&A included in the Company–s 2015 Annual Report. 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 indicated. References to “Shaw”, the “Company”, “we”, “us” or “our” mean Shaw Communications Inc. and its subsidiaries and consolidated entities, unless the context otherwise requires.

Caution concerning forward-looking statements

Statements included in this MD&A that are not historic constitute “forward-looking statements” within the meaning of applicable securities laws. Such statements include, but are not limited to, statements about future capital expenditures, asset acquisitions and dispositions, financial guidance for future performance, business strategies and measures to implement strategies, competitive strengths, expansion and growth of Shaw–s business and operations, and other goals and plans. They can generally be identified by words such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “target”, “goal” and similar expressions (although not all forward-looking statements contain such words). All of the forward-looking statements made in this report are qualified by these cautionary statements.

Forward-looking statements are based on assumptions and analyses made by Shaw in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances as of the current date. These assumptions include, but are not limited to, general economic conditions, interest, income tax and exchange rates, technology deployment, content and equipment costs, industry structure, conditions and stability, government regulation and the integration of acquisitions. Many of these assumptions are confidential.

You should not place undue reliance on any forward-looking statements. Many factors, including those not within Shaw–s control, may cause Shaw–s actual results to be materially different from the views expressed or implied by such forward-looking statements, including, but not limited to, general economic, market and business conditions; changes in the competitive environment in the markets in which Shaw currently operates and will operate and from the development of new markets for emerging technologies; industry trends and other changing conditions in the entertainment, information and communications industries; Shaw–s ability to execute its strategic plans; opportunities that may be presented to and pursued by Shaw; changes in laws, regulations and decisions by regulators that affect Shaw or the markets in which it now operates and will operate; Shaw–s status as a holding company with separate operating subsidiaries; and other factors referenced in this report under the heading “Risks and uncertainties”. The foregoing is not an exhaustive list of all possible factors. Should one or more of these risks materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described herein.

The Company provides certain financial guidance for future performance as the Company believes that certain investors, analysts and others utilize this and other forward-looking information in order to assess the Company–s expected operational and financial performance and as an indicator of its ability to service debt and return cash to shareholders. The Company–s financial guidance may not be appropriate for this or other purposes.

Any forward-looking statement speaks only as of the date on which it was originally made and, except as required by law, Shaw expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement to reflect any change in related assumptions, events, conditions or circumstances

Non-IFRS and additional GAAP measures

Certain measures in this MD&A do not have standard meanings prescribed by IFRS and are therefore considered non-IFRS measures. These measures are provided to enhance the reader–s overall understanding of our financial performance or current financial condition. They are included to provide investors and management with an alternative method for assessing our operating results in a manner that is focused on the performance of our ongoing operations and to provide a more consistent basis for comparison between periods. These measures are not in accordance with, or an alternative to, IFRS and do not have standardized meanings. Therefore, they are unlikely to be comparable to similar measures presented by other entities.

Please refer to “Non-IFRS and additional GAAP measures” in this MD&A for a discussion and reconciliation of non-IFRS measures, including operating income before restructuring costs and amortization, free cash flow and accelerated capital fund.

Introduction

Shaw transformation

With the closing of the WIND Mobile Corp. (“WIND”) acquisition and the sale of its Media division, Shaw has completed significant steps in its drive for growth and firmly positions Shaw to be a leading pure-play provider of connectivity that is focused on delivering consumer and business communications that are supported by best-in-class wireline, WiFi, wireless and data infrastructure.

The acquisition of WIND closed on March 1, 2016 for approximately $1.6 billion and was funded through a combination of cash on hand, $1.0 billion draw on bridge financing and a drawdown of $300 million on the Company–s credit facility.

With WIND, Shaw has acquired immediate scale with a subscriber base of approximately 980,000, extensive spectrum, retail distribution, a wireless network that has a clear path to LTE and the opportunity to integrate that wireless network with Shaw–s hybrid fibre-coax network and Shaw Go WiFi in a converged best-in-class network of networks. This vision will connect our customers when, how and wherever they want and with the speeds they want.

On April 1, 2016, Shaw Media Inc. (“Shaw Media”) was sold to Corus Entertainment Inc. (“Corus”) for approximately $2.65 billion. Shaw received $1.85 billion in cash and 71,364,853 Corus Class B non- voting participating shares issued at $11.21 per share. The total consideration remains subject to customary closing adjustments. As a result of the transaction, Shaw owns approximately 37% of Corus– total issued equity of Class A and Class B shares. The Corus shares held by Shaw are subject to retention periods of approximately one third of its interest in Corus for 12 months post-close, a second one third for 18 months post-close and the final one third for 24 months post-close. Shaw is required to have its Corus Shares participate in Corus– dividend reinvestment plan while subject to these retention periods until August 31, 2017.

The cash proceeds of the sale were applied to pay down the bridge financing and credit facility incurred to finance the acquisition of WIND.

Continuing Innovation & Growth

In the quarter, Shaw introduced a number of options for our video customers, starting with the launch of our FreeRange TV service, Limited TV, its new skinny basic video package mandated by the CRTC and a new 2-year ValuePlan.

FreeRange TV, a milestone on our roadmap to bring Comcast–s market-leading cloud-based X1 platform to Canadian viewers, was unveiled in January 2016 and as at the end of March had over 210,000 account activations and more than 360,000 unique devices. With approximately 70% of customers tuning into live TV, the ability to stream live TV on the go or outside of the home is one of the most popular features. We continue to make progress on our next generation video journey with the launch of FreeRange TV Web access on April 6. This product extends the FreeRange experience from a wireless mobile device to other connected devices such as laptops and SmartTVs and is another example of how Shaw is working to enhance the video experience for its customers. As we continue to expand the next generation video services and enhance broadband performance through the deployment of DOCSIS 3.1, we remain committed to providing a leading experience for our customers.

The Company was also one of the first to launch the CRTC mandated skinny basic package, Limited TV, on February 16, 2016 ahead of the CRTC required timeline. Limited TV is another option for customers where they can subscribe to a basic TV service and have the ability to supplement it with enhanced theme packs to build their own personalized TV package. Customers can also choose from additional value-added TV packages that provide more hardware options and access to the most popular channels at competitive prices, including the new 2-year ValuePlans. With 2-Year ValuePlans and FreeRange TV, more Shaw customers will enjoy a whole home experience, shomi, CraveTV and the latest live and on- demand content, whenever and wherever they want.

As previously announced, our Business Infrastructure Services division expanded into the eastern U.S. with its acquisition of INetU, Inc. (“INetU”), for US$162 million on December 15, 2015. Integration is well underway with the Pennsylvania-based customer-centric solutions provider for public, private and hybrid cloud environments and managed security and compliance services.

Collectively, our asset realignment and continuing innovation in our core business has renewed our focus on growth and operational improvement that will support execution of our strategic priorities.

Selected financial and operational highlights

Basis of presentation

In the second quarter of fiscal 2016, Shaw signed an agreement with Corus Entertainment Inc. (“Corus”), a related party subject to common voting control, to sell 100% of its wholly owned subsidiary Shaw Media Inc. (“Shaw Media”) for approximately $2.65 billion, comprised of $1.85 billion in cash and 71,364,853 Corus Class B non-voting participating shares issued at $11.21 per share. The total consideration remains subject to customary closing adjustments. The transaction closed on April 1, 2016 subsequent to Shaw–s second quarter reporting period. Accordingly, the assets and liabilities, operating results and operating cash flows for the previously reported Media division are presented as discontinued operations separate from the Company–s continuing operations. Prior period financial information has been reclassified to present the Media division as a discontinued operation, and has therefore been excluded from both continuing operations and segmented results for all periods presented in the accompanying financial statements. This Management–s Discussion and Analysis reflects the results of continuing operations, unless otherwise noted.

Shaw–s current method of counting subscribers measures at the individual unit level. This measure suited traditional offerings such as analog video and phone because larger installations would result in subscriber additions that correlated relatively with the increase in business. With the introduction of SmartVoice, SmartWiFi and SmartSecurity cloud based solutions, subscriber additions are generally recorded at the customer level so that one customer is recorded when an installation may involve many units. The result is that when new customers subscribe for our market leading services, the subscriber impact is minimal. The effects are greater when existing customers upgrade from analog video and/or phone service with a number of subscriber units to our SmartVoice, SmartWiFi and/or SmartSecurity cloud based solutions because the customer that was formerly counted for each unit is now counted as a single subscriber. This means that, as the Company succeeds by attracting new and existing customers to its new offerings, the number of Business Network Services subscribers will fall even as revenue increases – as for the current quarter.

Overview

Our 2016 second quarter financial results represented improvements in operating income before restructuring costs and amortization over the second quarter 2015. Highlights of the quarter are as follows:

Revenue increased 3.0% over the comparable quarter reflecting growth in the continuing divisions, Consumer, Business Network Services and Business Infrastructure Services. The improvement is primarily attributed to customer growth in both the Business Network Services and Business Infrastructure Services divisions.

Operating income before restructuring costs and amortization of $502 million and $1.01 billion for the three and six month periods improved 0.8% and 2.5% compared to $498 million and $985 million for the comparable periods. The improvement was driven by profitable growth in the Business Infrastructure Services division on customer growth, the acquisition of INetU and the effect of favourable year-over-year foreign exchange offset partially by lower operating income before restructuring costs and amortization in the Consumer division, a result of slightly lower revenues and higher costs associated with the deployment of FreeRange TV and to higher programming costs.

Revenue and operating income before restructuring costs and amortization increased $8 million and decreased $6 million, respectively, over the first quarter 2016. The increase in revenue was due primarily to customer growth in the Business Infrastructure Services division partially offset by lower revenue in the Consumer division. The decrease in operating income before restructuring costs and amortization was the result of lower Consumer division revenue and higher costs related to next generation video and higher programming costs, offset by customer growth in both the Business Infrastructure Services and Business Network Services divisions and the acquisition of INetU in mid-December 2015.

Consumer and Business Network Services, excluding named and wholesale customers, had 5.85 million RGUs as at February 29, 2016. During the quarter, Consumer RGUs declined by 41,922, an improvement over the 43,750 RGUs lost in the first quarter of 2016 and 65,215 RGUs lost in the second quarter of 2015. RGU losses in the current quarter were driven primarily by phone losses of 14,473, satellite video losses of 6,002 and cable video losses of 25,782, partially offset by Internet gains of 4,335.

Net income was $164 million and $382 million for the three and six months ended February 29, 2016, respectively, compared to $168 million and $395 million for the same periods last year. The changes in net income are outlined in the following table.

Net income for the current quarter decreased $54 million compared to the first quarter of fiscal 2016 mainly due to lower income from discontinued operations of $32 million, primarily due to the seasonality of the Media business reflected in income from discontinued operations, net of tax, and net other costs and revenues of $13 million. Net other costs and revenues decreased primarily due to $8 million of costs recorded in the quarter related to the acquisition of WIND and INetU. See “Other income and Expense” for further detail on non-operating items.

Net income for the current quarter decreased $4 million from the comparable period mainly due to the change in net other costs and revenues of $43 million related to higher business acquisition costs associated with the WIND transaction and a distribution received in the prior year from a venture capital fund investment, higher equity loss of a joint venture and increased amortization almost fully offset by an increase in operating income before restructuring costs and amortization of $4 million, lower restructuring costs of $36 million and an increase in income from discontinued operations, net of tax, of $15 million.

Net income for the six month period decreased $13 million from the comparable periods mainly due to the change in net other costs and revenues of $45 million related to higher business acquisition costs associated with the WIND transaction, a distribution received in the prior year from a venture capital fund investment, higher equity loss of a joint venture, higher amortization and higher income taxes partially offset by an increase in operating income before restructuring costs and amortization by $25 million, decrease in restructuring costs by $36 million and an increase in income from discontinued operations, net of tax, of $16 million.

Free cash flow of $119 million and $291 million for the three and six months ended February 29, 2016, respectively, compares to $169 million and $361 million for the comparable periods. The decreases are primarily the result of higher planned capital expenditures offset partially by an increase in operating income before restructuring costs and amortization.

Outlook

With the acquisition of WIND and disposition of Shaw Media, Shaw is revising its fiscal 2016 guidance. Shaw–s revised fiscal 2016 guidance for Consumer, Business Network Services and Business Infrastructure Services, combined, is for operating income before restructuring costs and amortization to range between flat to low single digit growth over fiscal 2015.

Consolidated capital investment for Consumer, Business Network Services and Business Infrastructure Services, combined, is expected to be $995 million. The increase in expected capital spend reflects capital projects acquired in the INetU transaction and the effect of foreign exchange rates relative to plan.

Shaw expects to provide consolidated fiscal 2017 guidance, including WIND, in its normal course.

See “Caution concerning forward-looking statements”.

Non-IFRS and additional GAAP measures

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.

Below is a discussion of the non-IFRS financial measures and additional GAAP measures used by the Company and provides a reconciliation to the nearest IFRS measure or provides a reference to such reconciliation.

Operating income before restructuring costs and amortization

Operating income before restructuring costs and amortization is calculated as revenue less operating, general and administrative expenses. It is intended to indicate the Company–s ongoing ability to service and/or incur debt, and is therefore calculated before one-time items such as restructuring costs, amortization (a non-cash expense) and interest. Operating income before restructuring costs and amortization is also one of the measures used by the investing community to value the business.

Operating margin

Operating margin is calculated by dividing operating income before restructuring costs and amortization by revenue.

Income from discontinued operations before restructuring costs, amortization, taxes and other non-operating items

Income from discontinued operations before restructuring costs, amortization, taxes and other non- operating items is calculated as revenue less operating, general and administrative expenses from discontinued operations. This measure is used in the determination of free cash flow.

Free cash flow

The Company utilizes this measure to assess the Company–s ability to repay debt and return cash to shareholders.

Free cash flow is calculated as free cash flow from continuing operations and free cash flow from discontinued operations.

Free cash flow from continuing operations is comprised of operating income before restructuring costs and amortization and includes changes in receivable related balances with respect to customer equipment financing transactions as a cash item and dividends paid on the Company–s Cumulative Redeemable Rate Reset Preferred Shares.

Free cash flow from discontinued operations is comprised of income from discontinued operations before restructuring costs, amortization, taxes and other non-operating items after deducting program rights amortization on assets held for sale, cash amounts associated with funding CRTC benefit obligations related to media acquisitions and excludes non-controlling interest amounts that are included in the income from discontinued operations before restructuring costs, amortization, taxes and other non- operating items.

Free cash flow from continuing operations and free cash flow from discontinued operations are each calculated less interest, cash taxes paid or payable, capital expenditures (on an accrual basis and net of proceeds on capital dispositions and adjusted to exclude amounts funded through the accelerated capital fund) and equipment costs (net) and adjusted to exclude share-based compensation expense and recurring cash funding of pension amounts net of pension expense.

Free cash flow from continuing operations has not been reported on a segmented basis. Certain components of free cash flow from continuing operations, including operating income before restructuring costs and amortization continue to be reported on a segmented basis. Capital expenditures and equipment costs (net) are reported on a combined basis for Consumer and Business Network Services due to the common infrastructure and for Business Infrastructure Services is separately reported. Other items, including interest and cash taxes, are not generally directly attributable to a segment, and are reported on a consolidated basis.

Accelerated capital fund

In fiscal 2013, the Company established a notional fund, the accelerated capital fund, of $500 million with proceeds received, and to be received, from several strategic transactions. The accelerated capital initiatives were funded through this fund and not cash generated from operations. Key investments included the Calgary data centres, further digitization of the network and additional bandwidth upgrades, expansion of Shaw Go WiFi, and additional innovative product offerings related to Shaw Go WiFi and other applications to provide an enhanced customer experience. Approximately $110 million was invested in fiscal 2013, $240 million in fiscal 2014 and $150 million in fiscal 2015. The accelerated capital fund closed in fiscal 2015.

Consumer revenue for the current quarter of $934 million was down 0.3% relative to the comparable period. Lower video and phone RGUs and lower On Demand activity was offset by the impact of rate increases in the fourth quarter of 2015. For the six month period, revenue of $1.88 billion increased 0.8% over the comparable period primarily driven by the combined impact of January 2015 and August 2015 rate adjustments.

During the quarter, Consumer RGUs declined by 41,922 of which phone lines decreased 14,473, cable video and satellite video RGUs declined 25,782 and 6,002 respectively, and Internet customers increased by 4,335 RGUs. The economic slowdown in parts of western Canada continues to weigh on Consumer RGUs. Phone losses continue to moderate compared to the preceding three quarters.

Operating income before restructuring costs and amortization for the quarter of $403 million is lower by 1.2% relative to the comparable period and for the six month period is higher by 1.1%. The quarter results reflect a decrease in revenue on lower video and phone RGUs, fewer On Demand buys, higher implementation and recurring costs attributable to the launch of FreeRange TV and higher programming costs, partially offset by rate adjustments introduced in fiscal 2015 and lower employee related costs. Operating income before restructuring costs and amortization for the six month period increased due primarily to rate increases introduced in the fiscal 2015 offset partially by RGU losses, fewer On Demand buys, higher costs related to the launch of FreeRange TV and higher promotional discounts.

During the quarter, revenue declined $9 million and operating income before restructuring costs and amortization decreased $16 million over the first quarter of 2016. The impact of declines in video and phone RGUs, costs related to the launch of FreeRange TV, higher programming costs due to annual rate renewals and higher employee related costs due to new calendar year benefits was partially offset by increased satellite revenue on rate adjustments, growth in internet RGUs and lower marketing costs.

During the current quarter, the Company officially launched its new mobile TV App, “Shaw FreeRange TV” which provides an easy to use streaming service with access to live programming and over 35,000 VOD titles all in one comprehensive mobile app. Customers now have even more opportunity to watch what they want, where they want and how they want. In addition the company launched access to CraveTV. By bringing CraveTV together with shomi and live television on-the-go, we have made FreeRange TV the most compelling television viewing app available to Canadians. The current quarter also included another milestone with the completion of the second phase of the Digital Network Upgrade project in the Edmonton, Calgary, Winnipeg and Victoria regions. This second phase converts all remaining video signals to digital and allows the Company to double downstream capacity in our larger markets which provides opportunities for future bandwidth growth.

Revenue of $137 million and $273 million for the quarter and year-to-date were up 6.2% and 6.6%, respectively, over the comparable periods primarily due to customer growth in both the small to medium business and large enterprise markets. The core business, excluding satellite services, increased 7.7% in the current quarter and 8.2% on a year-to-date basis, reflecting customers converting to or adding Shaw–s services.

Operating income before restructuring costs and amortization of $66 million and $130 million for the quarter and year-to-date improved 1.5% and 3.2%, respectively, over the comparable periods. Improvements were due mainly to higher revenue driven by customer growth which was partially offset by annual salary rate increases and the upfront costs associated with pursuing growth opportunities, including additional employees and marketing costs associated with the launch of Smart suite of products.

In the second quarter, revenue increased $1 million over the first quarter of 2016, primarily due to customer growth. Operating income before restructuring and amortization improved $2 million as a result of lower marketing and administrative expenditures partially offset by higher employee related costs.

Our “SmartVoice” and “SmartWiFi” products, launched in the prior quarters continue to gain in the market as our current and prospective customer base becomes more aware of the benefits that these products offer. “SmartVoice” allow employees to collaborate seamlessly across their desk phones, mobile devices and computers in the office, at a client–s business, from home and elsewhere. “SmartWiFi” provides seamless integration between wireless and wired networks and access to built-in analytics which provide monitoring and insights so business owners can continually optimize their WiFi networks.

Revenue of $89 million for the three month period was up 48.3% over the comparable period primarily due to customer growth, the acquisition of INetU and the favourable impact of foreign exchange. For the six month period, revenue of $162 million increased 40.9% over the comparable period. Excluding the impact of foreign exchange, Business Infrastructure Services revenue for the US based operations increased by 28.0% to US$64 million for the three month period and by 21.2% to US$120 million for the six month period. The acquisition of INetU in December 2015, included in revenue for US based operations, resulted in an increase in revenue of $10 million for the three and the six months ended February 29, 2016.

Operating income before restructuring costs and amortization improved over the comparable period by 32.0% for the current quarter and by 26.1% for the six month period. Improvements are partially attributed to the acquisition of INetU, the impact of a favourable year over year foreign exchange, and customer growth, partially offset by costs associated with the new data center operations in Calgary, Alberta and Portland, Oregon and the impact of the re-measurements of share appreciation rights.

Compared to the first quarter of 2016, revenue increased 21.9% primarily as a result of customer growth and the acquisition of INetU. Operating income before restructuring costs and amortization increased 32.0% over the prior quarter reflecting the impact of increased revenues partially offset by higher employee related costs and the commencement of operations at the Calgary, Alberta facility.

On December 15, 2015, ViaWest closed the acquisition of INetU, a Pennsylvania-based customer- centric solutions provider for public, private and hybrid cloud environments and managed security and compliance services. INetU owns its primary facility in Pennsylvania and has cloud capacity in Virginia, Washington, the United Kingdom and the Netherlands. The transaction was financed through a combination of borrowings under ViaWest–s and the Company–s revolving credit facilities and incremental term loan proceeds under ViaWest–s credit facility.

Capital expenditures and equipment costs

Capital investment was $274 million and $519 million in the current three and six month periods. Capital investment for the comparable periods was $254 million and $493 million and included $29 million and $59 million, respectively, of investment funded through the accelerated capital fund. The accelerated capital fund initiatives, which were completed in the fourth quarter of 2015, included investment on new internal and external Calgary data centres, increasing network capacity, next generation video delivery systems, back office infrastructure upgrades, and expediting the WiFi infrastructure build.

Consumer and Business Network Services

Success based capital for the three and six month periods of $68 million and $141 million were $2 million and $3 million lower than the comparable periods last year. The lower current quarter spend primarily reflected lower digital phone installation activity. On a year-to-date basis the lower phone activity along with decreased spend driven by the timing of delivery of advanced Internet WiFi modem purchases, was partially offset by higher Satellite success based spend as a result of improved customer activations and increased equipment discounts, together with lower rental returns, due mainly to the termination of the Satellite rental program. Cable video success base spend was generally in line with last year driven by higher activations of whole home installations offset by lower cost deployments resulting from the use of refurbished units.

For the three and six month periods, investment in the combined upgrades and enhancement and replacement categories was $112 million and $215 million, an increase of $30 million and $60 million over the comparable periods. The increase was primarily due to investment in the core network including significant bandwidth and upgrade programs, next generation video delivery platforms necessary to support the rollout of advanced guide and mobile content experiences, timing of bulk material and vehicle purchases, investment in Business Network Services managed WiFi and SmartVoice products offset by lower spend on Shaw Go WiFi access points.

Investment in buildings and other of $27 million and $43 million for the three and six month periods was down $19 million and $59 million, respectively, over the comparable periods. The decrease relates to lower spend on the new internal data centre and Shaw Court refurbishment expenditures offset by improvements to our new Winnipeg and Montreal centres of excellence and investment in back office replacement systems The year-to-date results also include lower capitalized interest and proceeds on the sale of a real estate property.

New housing development capital investment for the three and six month periods of $27 million and $50 million was comparable to the prior year periods.

Business Infrastructure Services

Capital investment of $40 million and $70 million for the three and six month periods, respectively, was primarily growth related capital investment in core infrastructure and equipment to expand existing facilities in Denver, Colorado and Portland, Oregon along with development of the newest data center in Plano, Texas. Also included in the six month period is $8 million related to investment in the Calgary, Alberta facility.

Revenue and income from discontinued operations net of tax for the quarter was $207 million and $48 million, respectively, compared to $218 million and $33 million last year. The revenue decrease was driven primarily by lower advertising revenues partially offset by higher subscriber and other revenues. The increase in income from discontinued operations before tax was primarily due to decreased advertising, programming costs and employee related costs in addition to an adjustment to cease amortization of non-current assets offset partially by a decrease in revenue and internal costs incurred in relation to the sale of the division. As of the date the Media division met the criteria to be classified as held for sale, the Company ceased amortization of non-current assets of the division, including program rights, property, plant and equipment, intangibles and other. Amortization that would otherwise have been taken in the period amounted to $20 for program rights and $4 for property, plant and equipment, intangibles and other.

For the six month period, revenue of $483 million and income from discontinued operations net of tax of $128 million compared to $506 million and $112 million last year, respectively. The revenue decline was primarily due to reduced advertising revenues and lower syndication revenues as the prior year period benefited from shomi sub-licensing revenue with the service launching in November 2014. The increase in income from discontinued operations before tax was primarily due to decreased advertising, programming costs and employee related costs in addition to the adjustment to cease amortization of non-current assets offset partially by a decrease in revenue.

Capital investment continued on various projects in the quarter and included upgrading production equipment and infrastructure. Capital investment for the quarter was $3 million.

Net income for the current quarter decreased $54 million compared to the first quarter of fiscal 2016 mainly due to decreased income from discontinued operations of $32 million, primarily due to the seasonality of the Media business reflected in income from discontinued operations and net other costs and revenues of $13 million. Net other costs and revenues decreased primarily due to $8 million of costs recorded in the quarter related to the acquisition of WIND and INetU.

In the first quarter of 2016, net income decreased $58 million compared to the fourth quarter of 2015 mainly due to a change in net other costs and revenues of $140 million and decrease in operating income before restructuring costs and amortization of $17 million offset by an increase in income from discontinued operations, net of tax, of $51 million and a decrease in income taxes of $50 million. Net other costs and revenues decreased primarily due to a fourth quarter 2015 gain on the sale of wireless spectrum of $158 million less the impact of a $27 million write-down of a private portfolio investment in the same period offset by an increase in the equity loss of a joint venture of $5 million in the first quarter of 2016.

In the fourth quarter of 2015, net income increased $67 million primarily due to improved net other revenue items of $191 million partially offset by lower income from discontinued operations, net of tax, of $44 million and higher income tax expense of $70 million. The improvement in net other revenue items was due to the combined effects of the aforementioned sale of spectrum licenses and write-down of a private portfolio investment during the fourth quarter and the $59 million net charge arising in the third quarter related to an impairment of goodwill, write-down of IPTV assets and proceeds received on the Shaw Court insurance claim.

In the third quarter of 2015, net income increased $41 million due to higher operating income before restructuring costs and amortization of $29 million, an increase in income from discontinued operations, net of tax, of $40 million, lower restructuring costs of $35 million and $11 million of proceeds related to the Shaw Court insurance claim, partially offset by a charge for impairment of goodwill of $15 million and write-down of IPTV assets of $55 million as well as the distributions received from a venture capital fund in the second quarter. The impairment of goodwill was in respect of the Tracking operations in the Business Network Services division and was a result of the Company–s annual impairment test of goodwill and indefinite-life intangibles in the third quarter. The write-down of IPTV assets was a result of the Company–s decision to work with Comcast to begin technical trials of their cloud-based X1 platform.

In the second quarter of 2015, net income decreased $59 million due to lower income from discontinued operations, net of tax, of $46 million and restructuring expenses of $36 million partially offset by higher operating income before restructuring costs and amortization of $10 million, net other revenue items of $24 million due to the aforementioned venture capital fund distributions.

In the first quarter of 2015, net income increased $35 million due to income from discontinued operations, net of tax, of $56 million and a decrease in income taxes of $26 million, partially offset by increases in amortization of $33 million and net other costs of $17 million. The increase in net other costs was primarily due to an equity loss of $13 million in respect of the Company–s 50% interest in shomi, a new subscription video-on-demand service launched in the first quarter.

In the fourth quarter of 2014, net income decreased $36 million primarily due to lower income from discontinued operations, net of tax, of $53 million and lower income taxes of $12 million, partially offset by the effect of the restructuring announced during the previous quarter.

Other income and expense items

Amortization

Amortization of property, plant and equipment, intangibles and other increased over the comparable periods as the effect of higher foreign exchange rates on the translation of ViaWest and the amortization of new expenditures.

Interest expense for the three and six month periods ended February 29, 2016 increased over the comparable periods primarily due to increased debt related to the INetU acquisition, foreign exchange on US dollar denominated debt and a decrease in capitalized interest.

Business acquisition costs

During the current quarter and year to date, the Company incurred $7 million and $8 million, respectively, of acquisition related costs for professional fees paid to lawyers, consultants and advisors in respect of the acquisition of WIND which closed on March 1, 2016. Also included in the current quarter, $1 million was incurred related to the acquisition of INetU. During the first quarter of the prior year, $6 million of costs were incurred in respect of the acquisition of ViaWest.

Equity loss of a joint venture

For the three and six month periods ended February 29, 2016, the Company recorded equity losses of $19 million and $36 million, respectively, compared to $16 million and $29 million for in the comparable periods related to its interest in shomi, the subscription video-on-demand service launched in early November 2014.

Other losses

This category generally includes realized and unrealized foreign exchange gains and losses on U.S. dollar denominated current assets and liabilities, gains and losses on disposal of property, plant and equipment and minor investments, and the Company–s share of the operations of Burrard Landing Lot 2 Holdings Partnership. In the comparative six month period, the category also included a write-down of $3 million in respect of a property that was classified as held for sale and distributions of $27 million from a venture capital fund investment.

Income taxes

Income taxes are higher in the current year mainly due to an increase in the provincial tax rate and the impact of adjustments in the first quarter of fiscal 2015.

Financial position

Total assets were $15.0 billion at February 29, 2016 compared to $14.6 billion at August 31, 2015. Following is a discussion of significant changes in the consolidated statement of financial position since August 31, 2015.

Current assets increased $2.36 billion primarily due to the reclassification of $2.65 billion assets as held for sale related to the disposition of Shaw Media, including cash of $41 million, accounts receivable of $235 million, other current assets of $33 million and non-current assets comprised of intangibles of $1.68 billion, goodwill of $538 million, property and equipment of $105 million, and deferred income tax asset of $18 million. Aside from amounts reclassified as held for sale, other current assets increased due to timing of payment of certain expenditures, including maintenance and support contracts.

Investments and other assets increased $5 million primarily due to minor investments in a number of privately held entities and to an increase in shomi investment net of equity loss.

Property, plant and equipment decreased $31 million due to $105 million reclassified as held for sale offset by capital investment in excess of amortization. Other long-term assets increased $5 million mainly due to an increase in maintenance and support contracts. Intangibles and goodwill decreased $1.90 billion due to $2.22 billion reclassified as held for sale offset by $68 million of intangibles and $165 million goodwill recorded on the acquisition of INetU, net software intangible additions of $35 million, net program rights additions, prior to reclassification, of $18 million and the ongoing effect of foreign exchange arising on translation of ViaWest.

Current liabilities decreased $358 million during the quarter not including the $212 million of long-term liabilities reclassified as current liability held for sale related to the disposition of Shaw Media. The net decrease in current liabilities of $146 million, inclusive of the reclassified amount, was due to decreases in current portion of long term debt of $305 million as a result of the $300 million repayment of the variable senior rate notes on February 1, 2016, decreased income taxes payable of $91 million as a result of installments made in the period and a slight reduction in provisions of $10 million, partially offset by an $44 million increase in accounts payable and accrued liabilities due to timing of payment and fluctuations in various payables including capital expenditures, interest and programming costs.

Long-term debt increased $595 million due to the issuance of $300 million in fixed rate senior notes at a rate of 3.15% due February 19, 2021 and debt incurred related to the acquisition of INetU under ViaWest–s and the Company–s credit facility totaling US $170 million and the effect of foreign exchanges rates on ViaWest–s debt and the Company–s US dollar borrowings under its credit facility.

Other long-term liabilities decreased $74 million mainly due to amounts reclassified as held for sale and contributions to employee benefit plans partially offset by actuarial losses recorded on those plans in the current quarter.

Deferred credits decreased $12 million due to a decline in deferred equipment revenue.

Deferred income tax liabilities decreased $133 million primarily due to the amounts reclassified as held for sale and current year income tax recovery, partially offset by amounts recorded on the acquisition of INetU.

Shareholders– equity increased $208 million primarily due to increases in share capital of $107 million, retained earnings of $76 million and equity attributable to non-controlling interests of $16 million and a decrease in accumulated other comprehensive loss of $10 million. Share capital increased due to the issuance of 4,391,854 Class B non-voting participating shares (“Class B Non-Voting Shares”) under the Company–s option plan and Dividend Reinvestment Plan (“DRIP”). As at March 31, 2016, share capital is as reported at February 29, 2016 with the exception of the issuance of a total of 840,594 Class B Non- Voting Shares upon exercise of options under the Company–s option plan and the DRIP, and 2,866,384 Class B Non-Voting Shares related to the acquisition of WIND. Retained earnings increased due to current year earnings of $366 million, partially offset by dividends of $290 million while equity attributable to non-controlling interests increased due to their share of current year earnings. Accumulated other comprehensive loss decreased due to the net effect of exchange differences arising on the translation of ViaWest and U.S. dollar denominated debt designated as a hedge of the Company–s net investment in those foreign operations as well as re-measurements recorded on employee benefit plans.

Liquidity and capital resources

In the current year, the Company generated $291 million of free cash flow, including $103 million of free cash flow from discontinued operations. Shaw used its free cash flow along with $300 million proceeds from a senior note issuance, borrowings of $119 million under its credit facility, borrowings of $178 million under ViaWest–s credit facility and proceeds on issuance of Class B Non-Voting Shares of $12 million to repay the floating rate $300 million senior notes, finance the $223 million acquisition of INetU, pay common share dividends of $189 million, fund the net working capital change of $96 million, make $43 million in financial investments, repay $25 million borrowings under the its credit facility and invest an additional net $25 million in program rights. At February 29, 2016, $41 million of cash was classified as held for sale.

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 $93 million during the six months ending February 29, 2016.

On December 15, 2015, ViaWest closed the acquisition of 100% of the shares of INetU for approximately US$162 million which was funded through a combination of borrowings under ViaWest–s and the Company–s revolving credit facilities as well as incremental term loan proceeds under ViaWest–s credit facility. In addition, ViaWest–s revolving credit facility was increased from US$85 million to US$120 million.

On February 11, 2016 the Company amended the terms of its bank credit facility to increase the maximum borrowings from $1.0 billion to $1.5 billion under the bank credit facility.

Subsequent to the quarter end, the Company entered into an agreement with a syndicate of lenders to provide a $1.0 billion non-revolving term loan facility to partially fund the acquisition of WIND. The Company used the proceeds of the term loan along with cash on hand, $300 million borrowings under its existing bank credit facility and proceeds from the issuance of 2,866,384 Class B Non-Voting Shares to finance the acquisition of WIND on March 1, 2016. The $1.0 billion non-revolving term loan facility and $300 million borrowings under the Company–s bank credit facility were repaid on April 1, 2016 using the proceeds received from the sale of the Company–s Media division to Corus.

Shaw–s and ViaWest–s credit facilities are subject to customary covenants which include maintaining minimum or maximum financial ratios. At February 29, 2016, Shaw is in compliance with these covenants and based on current business plans, the Company is not aware of any condition or event that would give rise to non-compliance with the covenants over the life of the borrowings.

Based on the aforementioned financing activities, available credit facilities and forecasted free cash flow, the Company expects to have sufficient liquidity to fund operations and obligations, including maturing debt, during the upcoming 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 from Operations

Operating Activities

Funds flow from operations increased over the comparable periods primarily due to lower business acquisition costs, lower income tax expense and higher operating income before restructuring costs and amortization partially offset by higher interest expense. The net change in non-cash working capital balances related to operations fluctuated over the comparative periods due to fluctuations in accounts receivable and the timing of payment of current income taxes payable and accounts payable and accrued liabilities.

Investing Activities

The cash used in investing activities increased over the comparable quarter due primarily to the acquisition of INetU in the quarter, an increase in cash flows used in discontinued operations and higher cash outlay for capital expenditures and inventory in the current quarter. For the six month period ended February 29, 2016, cash used in investing activities decreased over the comparable quarter primarily due to the acquisition of ViaWest in September 2014 partially offset by higher cash outlays for capital expenditures and inventory in the comparable period and a decrease in cash from discontinued operations.

Financing Activities

The changes in financing activities during the comparative periods were as follows:

Accounting standards

The MD&A included in the Company–s August 31, 2015 Annual Report outlined critical accounting policies, including key estimates and assumptions that management has made under these policies, and how they affect the amounts reported in the Consolidated Financial Statements. The MD&A also describes significant accounting policies where alternatives exist. The condensed interim consolidated financial statements follow the same accounting policies and methods of application as the most recent annual consolidated financial statements.

Recent accounting pronouncements

The Company has not yet adopted certain standards and amendments that have been issued but are not yet effective. The following pronouncements are being assessed to determine their impact on the

Company–s results and financial position.

Risks and uncertainties

The significant risks and uncertainties affecting the Company and its business are discussed in the Company–s August 31, 2015 Annual Report under “Known events, trends, risks and uncertainties” in Management–s Discussion and Analysis.

The sale of Shaw Media and retention of a smaller equity interest in Corus has reduced the Company–s exposure to risks relating to Media as described in the August 31, 2015 Annual Report.

The acquisition of WIND exposes Shaw to new risks relating to wireless operations. The descriptions of many of the risks discussed in the Company–s August 31, 2015 Annual Report are relevant to the Company–s expansion into the wireless communications business, including, risks described under “Competition and technological change”, “Impact of regulation”, “Economic conditions”, “Interest rates, foreign exchange rates, and capital markets”, “Litigation”, “Network failure”, “Information systems and internal business processes” and “Reliance on suppliers”. The following is an overview of the regulatory environment relating to wireless operations and certain risks that are particular to WIND.

Overview of Regulatory Environment for Wireless Operations

WIND currently owns and operates a 3G mobile wireless network in Ontario, Alberta and British Columbia, and offers services to customers over this network as a Wireless Service Provider (“WSP”) and a Wireless CLEC.

The issuance of licenses for the use of radiofrequency spectrum in Canada is administered by Innovation, Science and Economic Development Canada (formerly, Industry Canada, and referred to as the “Department”) under the Radiocommunication Act. The use of spectrum is governed by conditions of license, including license term, transferability/divisibility, technical compliance requirements, lawful interception, research and development, and mandated antenna site sharing and domestic roaming services.

WIND–s AWS-1 licenses were issued in March 2008 for a term of ten years. Prior to expiration, WIND may apply for license renewal for an additional license term of up to ten years. WIND–s AWS-3 licenses were issued in April 2015 and have a term of 20 years. WIND has a high expectation that new licenses will be issued for a subsequent term through a renewal process unless a breach of license condition has occurred or some unforeseen issue occurs. The process for issuing licenses after the initial term, and applicable terms and conditions of such renewals, will be determined by the Department.

In June 2013, the Department set out a framework governing transfers, divisions and subordination of spectrum licenses for commercial mobile spectrum. The framework sets out considerations and criteria for reviewing and approving license transfers, prospective transfers, and deemed license transfers, which include the consideration of the quantum and concentration of license holdings of the applicants in the licensed area, availability of alternative spectrum, and the degree of deployment of spectrum by the applicants. The framework articulates review procedures and timelines.

The CRTC regulates mobile wireless services under the Telecommunications Act. In August 1994, the CRTC decided to forbear from regulating most areas pertaining to mobile wireless service (while deciding to maintain active oversight of customer confidential information and other general conditions for mobile wireless service, including mandating wireless number portability and issues pertaining mobile 911). Further, the CRTC published the current Wireless Code in June 2013 (which came into effect in December 2013), which imposes inter alia limitations on early cancellation fees to ensure customers are not liable to contract terms longer than two years, the unlocking of wireless devices, mandating trial periods for wireless contracts and setting default caps on overage roaming charges. In May 2015, the CRTC issued a comprehensive policy framework for wholesale wireless services, including roaming, tower sharing and mobile virtual network operators (“MVNOs”). The CRTC required the three national wireless incumbent carriers to provide wholesale roaming services to other wireless carriers, including WIND, at cost-based rates. A proceeding is underway to set these cost-based rates, which should be completed by late 2016 or early 2017. The CRTC did not mandate MVNO access services. The cost-based wholesale roaming tariff proceeding may have an impact on WIND–s roaming costs, and on the rates and services tha