Bell, Telus chipping away at Rogers’ lead in postpaid wireless

Data usage and subscriber growth powered BCE Inc. and Telus Corp. to higher first quarter wireless revenues as the two companies added more postpaid subscribers at a faster pace than rival incumbent Rogers Communications Inc. In an earnings statement released Thursday, Bell said it added a net 59,497 postpaid wireless subscribers in the three-month period that ended March 31, bringing its total postpaid subscriber base to 6.48 million, representing 84.5 per cent of its 7.67 million total wireless subscribers. Telus also reported its earnings Thursday, and said it added 59,000 postpaid subscribers over the same period, bringing its postpaid total to 6.6 million subscribers, representing 85.7 per cent of its total wireless subscriber base of 7.7 million. “To put it succinctly, Bell and Telus are clearly beating up on Rogers and still taking share of not just postpaid subscribers, but EBITDA , cash flow and everything else,” Ghose Canaccord Genuity analyst Dvai Ghose said in a phone interview. “I think people don’t fully recognize the weakness of Rogers.” Rogers, Canada's largest wireless provider by subscribers, said in April that it added 32,000 postpaid wireless customers in the first three months of 2013. Its postpaid subscriber base stood at 7.87 million customers as of March 31, the company said, representing 84 per cent of its total wireless subscriber base of 9.38 million. Postpaid subscribers are the most lucrative segment for wireless providers as they return higher monthly user fees than prepaid customers and the bulk of them are bound in multi-year contracts. Postpaid subscribers also tend to be heavier users of mobile data services. MacDougall, MacDougall & MacTier telecom analyst Troy Crandall said in a phone interview that Rogers is facing more competition from Bell for bundled customers switching to Bell’s fibre-based TV and Internet product in Ontario and Quebec. Many customers signing up for Bell’s new Fibe TV and Internet services are also taking the company’s wireless services for bundling discount, he said. “It seems that for the quadruple bundle , more people are going to Bell. To get a better deal, a lot of them are going wireless as well,” Crandall said. A year-end analysis of TV subscriber numbers, published by The Wire Report in March, showed that Telus' and Bell's fibre-based IPTV systems added the most TV subscribers in the 2012 fiscal year, while Rogers' cable TV system lost a net 83,000 subscribers. Rogers said in April that its average revenue per user for postpaid subscribers was $68.56 per month, while for prepaid customers it was $14.63. Blended average revenues per user were $59.68 per month across Rogers' total wireless subscriber base, compared to $55.92 for Bell and $60.04 for Telus. On Thursday, Bell and Telus did not report separate monthly average revenue per user data for their prepaid and postpaid customers. Bell reported $1.41 billion in wireless operating revenues in the first quarter, up 6.3 per cent from $1.33 billion in the same period a year earlier. Bell said growth was powered by a 7.2 per cent rise in wireless “service revenues”—which does not include equipment sales—due to additional postpaid subscribers in the higher-priced Western Canada market, as well as data revenues, more smartphones, and services such as mobile TV. George Cope, Bell’s president and CEO, said in a conference call with analysts Thursday that the company will surpass 800,000 mobile TV subscribers “over the next week or so.” The service costs an additional $5 per month for 10 hours of mobile TV viewing per month, according to the company’s website, and additional charges if customers go beyond the 10 hours. Crandall said customer switches from Rogers over the past three years can also be attributed in part to Bell and Telus carrying Apple Inc.’s iPhone in late 2009. Prior to that, Rogers was the only Canadian carrier to carry the popular device. “A lot of people had been locked in with Rogers just to get the iPhone,” Crandall said. “Those guys, when their contracts were ending, a lot of them I suspect went with Bell or Telus because now they could get their iPhone there.” Overall, Bell reported Thursday, data revenues rose 23.9 per cent in the first quarter and now represent 39.3 per cent of its monthly wireless subscriber revenues. Telus said its first quarter wireless revenues were $1.5 billion, up 6.4 per cent—or $89 million—over the same period a year earlier, while “network revenues” rose 6.4 per cent during the year to $1.37 billion on “continued growth in data services and subscribers.” Data revenues accounted for $583 million, or 43 per cent of total wireless revenues during the quarter, and rose $85 million from the same period a year earlier, representing growth of 17 per cent, Telus said. Rogers reported $1.76 billion in first quarter total wireless revenues and $1.68 billion in network revenues, rising three and four per cent, respectively, from the same period a year earlier. The company had $762 million in wireless data revenues during the quarter, rising 22 per cent from the same period a year earlier. Quarterly earnings statements analyzed by The Wire Report show that Bell and Telus have been chipping away at Rogers’ postpaid subscriber lead for more than a year. In 15 months, from the start of 2012 to March 31, 2013, Telus and Bell respectively added 410,000 and 446,800 net postpaid subscribers, compared to 257,000 for Rogers. Ghose said Rogers has reacted to the increased competition by cutting prices in Quebec as well as for subscribers of its Fido wireless brand. He said the strategy has caused revenues to fall without reducing “churn,” the rate at which customers leave. Rogers spent $247 million on wireless customer retention in the first quarter, up 18.8 per cent from $208 million in the same period a year earlier. That is higher than Telus, which said it spent $149.3 million on “retention costs” in the quarter, and Bell, which spent $134 million. Rogers spokeswoman Jennifer Kett said in an emailed statement Thursday that the company reported improved average revenue per user in the first quarter of 2013, as well as better “data and Internet revenue, churn and margin profiles.” Company wide, she said, the company is ahead of Bell and Telus in revenues and market share. “Rogers generated 31% higher revenue than Bell and 21% more than Telus in 1Q13--our market share is at 34%, versus Bell and Telus both at 28%,” Kett said. “In addition, our blended ARPU is almost $4 higher than Bell and essentially flat with Telus as we’re both at approximately $60.” She said Rogers is successfully attracting “heavy users” to its LTE network, “helping us maintain the highest data ARPU in the industry and which also grew at a faster rate than both Bell and Telus in 1Q13.” Kett said 71 per cent of the company's subscribers are using smartphones, the highest smartphone penetration rate in North America, with Bell and Telus each at 68 per cent. —With reporting by Nicholas Kyonka and nkyonka@thewirereport.ca and editing by Simon Doyle at sdoyle@thewirereport.ca

Bell, Telus chipping away at Rogers’ lead in postpaid wireless

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