A focused discussion regarding Business Infrastructure
Services and Business Network Services
December 2, 2015
1
Forward Looking Information
Statements included in this presentation that are not historic constitute forward-looking statements. Forward-looking statements are based on assumptions and involve risks and other factors which may cause actual results to be materially different from views expressed or implied by such statements. Accordingly, forward-looking statements are not guaranteed and undue reliance should not be placed on them. Material risks and other factors that could cause actual results to differ materially from the views expressed in forward-looking statements and material assumptions underlying forward-looking statements are identified in the Company's Management’s Discussion and Analysis for fiscal 2015 which has been filed with the Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission.
1
In April 2014, we announced a new organizational structure as part of our Focus to Deliver
multi-year program to enhance efficiency, productivity and improve customer service
capabilities
– Key outcomes driving this program include an improvement in customer satisfaction, an effective
customer-centric organization and a cost structure that enables future growth and high employee
engagement of top talent
2
Shaw closed the ViaWest transaction of US$1.2B effective September 1, 2014 and
rebranded as Business Infrastructure Services (“BIS”)
3
Shaw Business Infrastructure Services Investor Presentation
December 2, 2015
4
Nancy Phillips
Chief Financial
Officer
Chief Operating
Officer
Senior Vice President
Sales Chief Technology
Officer
Chief Data Centre
Officer
Management Team
Chief Marketing
Officer
Founder
President & CEO
Mike Krza Peter Strauss Jason Carolan Dave Leonard Jeff Gaillard Jason Nance
Relevant Industry Experience
30 Years 16 Years 10 Years 15 Years 33 Years 15 Years 20 Years
Prior Company Experience
Co-founder of
ViaWest; various
successful
entrepreneurial
enterprises
(i)Structure
5
Company History
Detailed Company Growth History
2011: Opened Hillsboro II data centre in Oregon
2011: Opened Synergy Park data centre in Richardson, Texas
2013: Expanded into Minneapolis (seventh market)
2013: Opened Lone Mountain data centre in Las Vegas
2013: Expanded into Phoenix (eighth market) through partnership with Cox
1999: Company Founded in Denver, CO as ISP roll-up
2002: Reached break-even EBITDA and launched managed services platform
2004: Expanded into Utah market (second market)
2005: Launched additional managed services, including metrics performance reporting, business continuity, and managed hosting solutions
2008: Acquired Dataside LLC, expanding footprint to 15 data centres across five states (fourth, fifth and sixth markets)
2009: Opened fifth data centre in the InfoMart (sixth data centre in Dallas metropolitan area)
2010: Oak Hill Capital Partners and GI Partners acquired ViaWest
2010: Completed two acquisitions (Consonus and SingleEdge) adding four new data centres in Utah
2006: Opened fifth facility in Salt Lake City, Utah
2006: Entered Portland (third market) with acquisition of Fortix
2007: Opened second downtown Denver facility and fourth data centre in Colorado (Cornell)
2007: Increased footprint in Utah with addition of Cottonwood facility
2014: Opened phase I of the Minneapolis data centre
2014: Opened phase I of the Compark data centre in Denver
2014: Acquired by Shaw
2015: Launching third data centre in greater Portland market
2015: Expanded into Calgary, Canada (ninth market)
2015: Acquired Applied Trust to enhance our security and compliance offering
2015: Acquired INetU a premier Cloud and Managed Service provider on the US East coast
1999 - 2005 2006 - 2007 2008 - 2010 2011 - 2013 2014 - 2015
Platform Expansion Strategic Transition Achieving Scale Beyond Denver Start-Up Years
6
Shift in customer demand to hybrid services positions ViaWest well for growth
– Managed and cloud services remain drivers of margin expansion for colocation providers
– Integrated offering of managed and cloud complements colocation driving cross-sell opportunities
– Improves customer stickiness and drives value of customer relationship
– Cloud offerings expand geographic customer footprint beyond existing markets
Market continues to redefine itself
– Large IaaS providers (e.g. Amazon and Google) lead the market in lower-end / commodity hosting
– Customers’ infrastructure purchasing decisions less defined by traditional retail versus wholesale
and more based on the actual applications they’re managing, with very specific requirements
– Providers looking to differentiate by offering full suite of services to meet wide range of customer
needs
– Geographic reach and interconnection / network density playing an increasingly vital role
Significant recent M&A activity across the industry, driven primarily by strategic buyers
– Recent acquisitions include TierPoint / Windstream Hosted Solutions, Digital Realty / Telx, Equinix /
Telecity, CyrusOne / Cervalis, QTS / Carpathia, Zayo / Latisys
Market Trends
7
Data centre and Cloud revenue
growth forecast (2012 – 2018)
Significant Investment Opportunity
Note: Represents North American revenue growth; "Cloud" refers to Cloud IaaS Source: Gartner Forecast: IT Services Worldwide (4Q14 Update)
8.7 9.8 10.9 11.8 12.9 14.0 15.2
14.116.4
18.520.7
23.025.0
27.03.3
5.17.3
10.4
14.1
18.4
22.9
4.8
5.5
6.3
7.2
8.3
9.4
10.6
-
$10
$20
$30
$40
$50
$60
$70
$80
2012 2013 2014 2015F 2016F 2017F 2018F
($US B)
Colocation Managed Hosting Public Cloud Private Cloud
16%
Expansion within our existing footprint
– Oregon
– Texas
M&A expansion into new products,
services and geographies
– Applied Trust
– INetU
Greenfield market expansion
– Calgary
Core Growth Initiatives
Continued investment in core growth initiatives to address the high demand for IT
outsourcing
8
ViaWest in the Infrastructure as a Service (IaaS) Landscape
Wholesale Colocation Managed Hosting Cloud - IaaS
Se
lec
t P
laye
rs
ViaWest offers a comprehensive suite of world‐class data centers and an IaaS portfolio of
Colocation, Dedicated Private Cloud, and Virtual Private Cloud all wrapped under a broad range
of managed services and a customer centered support experience
Hybrid capabilities allows for fully differentiated, customizable offering that serves customers “up
and down the stack”, improving customer retention and margins
9
Managed by ViaWest management team with responsibilities over all North
American business infrastructure service offerings
Co-Branded in Canada to leverage the strong brand image and reputation of
Shaw Communications
BIS investment provides Shaw with a growth platform in the attractive data
centre sector and expands on existing technology offering for mid-market
enterprises in the US and Canada
Business Infrastructure Services (BIS)
- Competes in the US data centre and cloud market
- Branded to leverage strong ViaWest expertise and track record
- Competes in the CDN data centre and cloud market
- Leverages Shaw brand and network with ViaWest expertise
Leveraging Reputation, Expertise and Brand
10
30 Data centres in 10 regions
9 cloud sites throughout North America
and Europe
Industry leading PUE for multitenant
data centres
120 MW power capacity
100% SLA and satisfaction guarantee
Calgary, Alberta
Seattle, WA
Portland, OR
Las Vegas, NV
Phoenix, AZ
Dallas, TX
Austin, TX
Minneapolis, MN
Allentown, PA
Richmond, VA
London
Salt Lake City, UT
Denver, CO
Geographic Reach and Comprehensive Capabilities
Hybrid IT Solutions
Private Cloud
Enterprise End-Users Public Cloud
Traditional IT
Comprehensive Suite of Solutions
Colocation and Network Services
Cloud Solutions
IT Consulting
Security and Compliance
Amsterdam
11
What Makes ViaWest Different
Operational Superiority Lead the Industry
Enabling Customers to Meet
Regulatory Responsibilities
Hybrid Solutions Future-Proof IT Decisions
with Optionality for Colocation,
Cloud, & Managed Services
Local Infrastructure Agnostic
Trusted Operator with
Local Presence and Expertise
Flexible Individualized Solutions
Aligned with Our
Customer’s IT Strategy
IT Builders Serve as Architects
Walking Customers Through
the Entire IT Spectrum
12
INetU is a managed cloud and dedicated hosting provider to enterprise customers
headquartered in Allentown, PA
Internationally diversified customer base across compliance sensitive industries
including retail, healthcare, SaaS & software and financial services
Provides a full-suite of managed services including solutions for private cloud,
multitenant cloud, managed dedicated servers, and hybrid cloud environments
including AWS in the US (VA, WA) and Europe (Amsterdam, London)
Industry leading customer satisfaction rating (NPS 74)
Building Scale and Expertise
Applied Trust is a comprehensive IT professional services firm specializing in security,
compliance, infrastructure and devops consulting
North American customer base in healthcare, finance, education, and government
Provides critical security infrastructure management and design services
13
Expertise around a spectrum of IT infrastructure solutions allows ViaWest to
provide individually tailored services to support a diverse set of customer
needs
Platform Agnostic Hybrid Service Offering
Colocation investments in Oregon,
Calgary and Texas build on our
infrastructure foundation
INetU investment bring scale and
expanded product offerings to our
Cloud and Managed Platform
Applied Trust expands our reach
into our customers IT roadmap
Space
and
Power
Remote
Hands
Network
and
Bandwidt
h
Private
Cloud
Public
Cloud Cloud
DRaaS
Complianc
e Security Applied
Trust
Consultin
g
14
ViaWest has a wide variety of satisfied customers across industry segments as well as
enabling leading SaaS and IaaS providers
ViaWest Representative Customers
Services
Retail /
Manufacturing
Financial
Entertainment /
Hospitality
Government /
Non-Profit
Communications /
Technology
Healthcare
Education
15
Revenue Diversification and Visibility (1)
(1) ViaWest customers in US$
MRR by Market – Oct 2015 Customer Count by MRR – Oct 2015 MRR by Customer Rank – Oct 2015
AZ6%
CO39%
MN2%
NV8%
OR9%
TX20%
UT16%
$0 - $1k47%
$1k - $5k29%
$5k - $20K16%
$20k - $100K7%
$100K+1%
Top 312%
Top 4-1012%
Top 11-2511%
Top 26-5010%Top 51-100
12%
Top 100-50031%
Other12%
Stable Recurring Revenue
Class
> 3 years
1 – 3 years
< 1 year
Contract
Counts
Avg. Contract
MRR MRR % Share
306
1,664
916
32%
61%
7%
US$18,387
US$6,409
US$1,332
> 3 years32%
1 year - 3 years61%
< 1 year7%
16
2015 Financial Review
(1) FCF is unlevered (i.e. no interest, no taxes)
vs. 2014
Strong finish to year with Q4/F15 MRR bookings of US$1.1 million, largest in history of the Company, generating strong momentum into fiscal year 2016
– Q4/F15 ViaWest revenue and EBITDA grew 11% and 15%, respectively from prior year
For fiscal year 2015, ViaWest revenue and EBITDA both increased by 10% over fiscal year 2014
– ViaWest EBITDA growth of 12% after adjustments for one-time legal expenses and longer-term incentives
ViaWest capital expenditures totaled US$91 million in 2015, which was largely attributed to expansion capital for the new Brookwood (OR) facility, existing facility augmentations and customer installations
– ViaWest maintenance capital as a percent of revenue was 1.6% and 2.1% for 2014 and 2015, respectively
2014 2015 ViaWest
$'s in millions ViaWest ViaWest
Foreign
Exchange
Canadian
Operations BIS vs 2014US$ US$ C$ C$ C$
Revenue $184 $203 $43 - $246 10%
Adj EBITDA $76 $83 $18 ($6) $95 10%
CapEx $88 $91 $21 $40 $152 4%
FCF (1)
($12) ($8) ($3) ($46) ($57) na
17
Investing in Future Cash Flow
vs. 2014
Calgary1 is designed to replicate what we have created in the US
– Start of Canadian initiative results in initial investment of C$40M in F2015
– Historically new market initiatives produce an EBITDA break even in 5 to 7 quarters
– Operations commenced in Q2/F16
10%
15%
20%
25%
30%
35%
40%
45%
50%
-
$20
$40
$60
$80
$100
$120
2014A 2015A 2016F
US
$'s
in m
illio
ns
Operating FCF Expansion Customer % of Revenue
Expanding EBITDA margins and low
maintenance capital drive strong operating
FCF
Management expects continued investment
to meet market demand
– +/- US$10M in simple free cash
flow for ViaWest
Strong operating FCF sustainable with
minimal customer and expansion capital
– Approximately 60% of bookings
from existing customers
ViaWest Operating FCF EBITDA less Maintenance Capital
Platform for Investment
18
Built For Long-term Sustained Growth
Robust revenue backlog with committed contract minimums
95%+ of revenue is contractually recurring, with average contract length of three years
Low revenue churn of ~0.8% per month
Operates 30 facilities across ten regional markets
Regional markets have lower threat of new entrants and fewer competing facilities
Scale and leadership position creates competitive advantage
Strong
Industry
Fundamentals
Demand growth outpacing supply growth
Growth in internet usage and mobile applications continues to drive demand for capacity
Continued shift to outsourced data centre operations
Mission critical nature of service provided creates barriers to entry
Well Positioned
in Attractive,
Regional Markets
Approximately 2,000 customers with limited customer or industry vertical concentration
Approximately 2/3 of bookings are from existing customers, driving revenue growth (net of churn) prior to any new customer wins
Strong
Relationships with
Diversified
Customer Base
Facilities fully equipped to ensure full and uninterrupted access to and transmission of data
24x7x365 support provided by ViaWest’s engineers
Industry leading reputation for infrastructure and network uptime
Attractive
Recurring Revenue
Model
Seasoned senior management team with deep industry and market experience
Demonstrated track record of successful execution and results
Average of ~20 years industry experience
Strong
Historical Financial
Performance
High Quality
Infrastructure and
Operations
Consistent organic revenue and EBITDA growth with improving margins
CY2012-2014 PF revenue and EBITDA CAGR of 14.1% and 16.8%, respectively
Combined company EBITDA margin of over 40%
Experienced
Management
Team
19
20
• Market: Review outlook on the business telecom market
• Customer: Share customer insights and segmentation
• Starting point: Recast Shaw Business’ starting point
• Strategy: Align on overarching strategy pillars to support it
• Program: Outline the detailed initiatives to support this strategy
• Update: Share results to-date
21
• Shaw Business Network Services (“BNS”) represents a significant growth opportunity and we are making the transition and appropriate investments to capitalize on the market segments we are focused on – Small Office Home Office (“SOHO”) and Small Medium Business (“SMB”)
– Drive penetration in SOHO/SMB markets with disciplined go-to-market execution and investments in team and network
– Capture share of wallet with SMB/Small Enterprise markets by filling core product gaps
– Expand into select segments of high growth data centre and managed services markets
• Core Canadian business telecom market is projected to grow ~2% p.a. over next 5 years
– Data and internet usage expanding, but facing new competitors and commoditization pressures
– Voice revenue will continue to decline as it becomes an OTT application
• Solid Y/Y growth in both Revenue and EBITDA for our Core Business at 9% and 10% respectively
• High margins remain consistent
1
$ in millions Core 1 Satellite 2 Total Core Satellite Total Core Satellite Total
Revenue 405$ 79$ 484$ 442$ 78$ 520$ 9% -1% 7%
EBITDA 203$ 37$ 240$ 223$ 34$ 256$ 10% -8% 7%
Margin 50.1% 47.0% 49.6% 50.3% 43.5% 49.3%
1. Core Business includes SMB, Enterprise and Wholesale
2.Satellite includes Shaw Broadcasting and Shaw Tracking
F2014 F2015 growth
22
• Industry Landscape
• Customer Insights
• Shaw Business
• Overview of Strategy
• Update
23
Core business growing slowly; software, data centre, managed services projecting high growth
Core wireline products projected to grow slowly
More advanced services such as managed network and data centre projected to grow much faster
Annual Canadian business telecom/IT spend ($B)
1. Includes Office Suites, CRM, Web conferencing, collaboration and social suites
Source: IDC, Gartner, BCG analysis 24
Data demands expanding...
• Traffic growing 20%+ p.a.
• ~20% more SMBs expect to use fiber/ethernet in 5 years
Voice becoming an app – subs and pricing will continue to erode
• 2/3rds of SMBs use or plan to use OTT voice
• 29%1 of SMBs using SIP
• OTT provides more features at lower costs
Changing core product focus towards data
1. Among those SMBs with trunking solutions
Managed service adoption high, even among SMBs
• ~50% of SMBs using managed IT and managed network/ security
ILEC/MSOs seen as reliable managed service provider
• 40% of SMBs would consider telecom provider as a vendor of managed services
Quality service vital to win, especially in managed services
• 95% of CIOs said they would switch providers for better service
IT outsourcing on the rise
25
Source: BCG IT Decision Maker Survey 2014 (n = 500), Shaw documents, BCG interviews, BCG analysis
26
Source: BCG CIO Interviews
Question: What new products would you buy from a telco?
27
• Industry Landscape
• Customer Insights
• Shaw Business
• Overview of Strategy
• Update
28
• Small businesses, on average, require fixed internet for ~70% of FTEs and fixed phone for ~50%
– Many businesses, including 70% of those with a mobile workforce, express interest in Go WiFi
• The online channel is the most important channel for reaching these businesses: 30% prefer online
– Similar to consumer, self serve will be a vital part of long-term strategy
• Managed service uptake is already high, even among smaller businesses
– ~75% of SMBs already use managed services and nearly half of SOHOs
– Data centre uptake is lower among SOHOs (35%) and SMBs (57%) vs. Enterprises (>75%)
• The key drivers of customer purchase are fairly balanced – it isn't just about cost
– 26% cite cost as the most important driver, but quality (23%) and security (20%) are quite important
29
Source: BCG IT Decision Maker Survey (US and Canada, Dec 2014)
30
Source: BCG IT Decision Maker Survey (US and Canada, Dec 2014)
31
~1/3rd of businesses have switched providers in the past five years
Source: BCG IT Decision Maker Survey (US and Canada, Dec 2014)
32
• Industry Landscape
• Customer Insights
• Shaw Business
• Overview of Strategy
• Update
33
Leveraging our core network asset to bring unique products and services to our target markets
34
Covering core and near-core telecom services, data centre and cloud
2013 Canadian business telecom/IT spend ($B)
1. Wireline Voice, Data, Internet. Data centre and Cloud and Managed Network adjusted to reflect typical division of telecom spend by province. (32% of Canadian telecom spending occurs in BC, AB, MB, SK).
2. Wholesale adjusted to remove wireless wholesale, and adjusted to reflect Western Canada. Source: IDC, Gartner, BCG analysis
35
SOHO/SMB Corporate Enterprise
0
200
400
600
800
1,000
1,200
1,400
1,600R
eve
nu
e (
Ms)
Significant opportunity exists within our current footprint
Western Canada wireline revenue
36
37
38
• Industry Landscape
• Customer Insights
• Shaw Business
• Overview of Strategy
• Update
39
Develop best in class business experience that is positioned
for long term growth
40
Enhanced Voice Managed Network / Security Managed WiFi
1. Based on market size, growth rates, competitiveness and industry trends.
Source: Customer/Expert interviews; Cisco market analyses; BCG Analysis
Hosted/ mngd DC services
41
• Sales
• Customer Support Trusted Advisor
• Enhanced Voice
• Cloud based Storage & Services
Convenience
• Managed WiFi
• Advanced Security
• Access to Shaw Go WiFi
Connected & Secure
• Pricing
• Promotion Switch & Save
Op
po
rtu
nit
y
42
• Industry landscape
• Customer insights
• Shaw Business
• Overview of strategy
• Update
43
44
45
46
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