Without iPhone, Videotron competing in about half the market

Acquiring “prime” 700 MHz spectrum will be key to Videotron Ltd.'s ability to sell the Apple Inc. iPhone and compete for about half of the Quebec market the company is missing due to operation on the AWS band, analysts say. Videotron, a Quebecor Media Inc. subsidiary, operates on spectrum in the AWS (1700 MHz and 2100 MHz) band, which it purchased in Industry Canada's 2008 wireless auction. The iPhone is not compatible with the band, also used by new entrants Wind Mobile and Mobilicity. Maher Yaghi, a telecom analyst with Desjardins Securities, said in an interview that companies without the ability to sell the iPhone are essentially competing in about half the market. “You're kind of trying to compete for half the market, so it does affect your penetration rates,” Yaghi said. “It forces the company to be more aggressive in its promotional activities to get the client to come and get an Android phone instead of an iPhone.” Analysts said in interviews Wednesday that Videotron is missing a significant piece of the Quebec market as it competes with incumbents BCE Inc., Telus Communications Co. and Rogers Communications Inc., which offer the iPhone. “Access to high-end devices is important for subscriber growth in a market that is increasingly focused on smartphones,” Greg MacDonald, an analyst with Macquarie Capital Markets, said in an interview. Bloomberg reported last week that RIM Ltd.'s BlackBerry does not lead in smartphone shipments in Canada. The news service said 2.08 million BlackBerrys shipped last year in Canada compared to 2.85 million iPhones. In February, ComScore reported that the BlackBerry operating system accounted for about 32.6 per cent of the Canadian market at the end of 2011. Apple’s iOS was at 31.2 per cent market share and Google Inc.’s Android operating system was at 27.8 per cent. Yaghi said acquiring 700 MHz spectrum in Canada’s auction, scheduled for the first half of 2013, “could potentially allow the company to be able to have more phones down the road.” He added that Videotron’s future device offerings will depend on the type of 700 MHz spectrum blocks that the company purchases in the auction. MacDonald noted that the prime spectrum blocks allow providers to “more quickly get access to premium devices.” For the auction, Industry Canada has identified the B, C, C1, and C2 blocks as “prime spectrum” available in each licence area. A fourth block, called the A block, will be available. The prime blocks are the so-called “beachfront” spectrum popular with device manufacturers because they are used by Verizon Communications Inc. and AT&T Inc. in the United States. Yaghi said that the B and C blocks are the same frequencies as those used by AT&T and the C1 and C2 blocks “are more of a Verizon type network.” “ more likely that future versions of the iPhone will probably be introduced on the B and C blocks,” Yaghi said, “because AT&T has a closer relationship and it was the original network that launched the iPhone in the U.S.” He said Videotron’s ability to launch the iPhone will depend on which frequencies Apple decides to make its devices available. “The network operators can’t move and offer the product if Apple does not support their band,” Yaghi said. “In Canada, the operators, even the big guys, really don’t have a say. Apple is Apple, and they dictate what their product will contain in terms of product traffic.” In an emailed statement to The Wire Report Wednesday, Serge Sasseville, vice-president of corporate and institutional affairs at Quebecor, said the company "has consistently argued that a more equitable distribution of spectrum, in both high and low frequency bands, is essential to ensuring that new entrants have access to the same breadth of technology ecosystems as the incumbent wireless carriers.” He said more spectrum bands offer more technology options, which is a good thing for all players. “As for what specific technologies or devices Videotron might gain access to as a result of the 700 MHz auction, we would prefer not to speculate too much at this time,” Sasseville said. “Suffice it to say that the 700 MHz band is a key driver of the LTE ecosystem in the United States, so clearly there will be some interesting devices available,” he said. Videotron, which launched wireless services in 2010, had 290,600 wireless subscribers at the end of 2011, which was up from 136,000 at the end of 2010. At the end of 2011, Bell said smartphones accounted for 48 per cent of its total postpaid subscribers. Telus' smartphones accounted for 53 per cent of its total postpaid subscribers, and Rogers' smartphones accounted for 56 per cent of its total. Anthony Lacavera, chairman of Wind Mobile, told The Wire Report last year that he believed Apple could release an AWS-compatible handset. “If we're prepared to make volume commitments, there's really nothing stopping us from dealing with Apple directly on it,” Lacavera said. news@thewirereport.ca

Without iPhone, Videotron competing in about half the market

News | March 28, 2012

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Without iPhone, Videotron competing in about half the market

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