Telus faces wireless battle in West as millions in East still unserviced

It shouldn't be surprising that Canada's incumbent wireless carriers are targeting Alberta. It has the fastest-growing population in the country, and more than 80 per cent of its residents are concentrated in urban areas. Alberta residents were also by far the most lucrative for wireless carriers in 2012, new CRTC data shows, with carriers earning 16 per cent more per month from each Albertan subscriber than from subscribers in other provinces. To top it all off, incumbent telco Telus Corp. had a 50 per cent share of Alberta's 3.8 million wireless subscribers last year, up from 49 per cent in 2011, and now seems ripe to face more intense competition. “The growth is in Alberta and out west right now,” MacDougall, MacDougall & MacTier analyst Troy Crandall said in a telephone interview. “That's where the economy is growing.” Rogers Communications Inc. said this week that it will spend $700 million on wireless infrastructure and other projects in Alberta over the next four years in an effort to increase its ability to compete with Telus. The company, which is Canada's largest wireless carrier with 9.4 million subscribers, had a 24 per cent share of Alberta's $2.82-billion wireless industry in 2012, falling from 26 per cent in 2011. “We have a good market share in Alberta, but we have lots and lots of upside,” John Boynton, executive vice-president and chief marketing officer at Rogers, said in a phone interview earlier this week. “There are many parts of Alberta where they don't have good choice. They're stuck with one provider, and what we don't want to do is just bring another alternative. What we want to do is bring an alternative with a much superior network, and a much faster network." BCE Inc. has also said over the past two years that it is targeting “the West,” including Alberta and British Columbia, and the West's higher subscriber revenues are one of the reasons why, Siim Vanaselja, the company's executive vice-president and chief financial officer, said at a CIBC investors conference in September. Bell's 22 per cent share of Alberta's wireless subscribers in 2011 rose to 23 per cent in 2012, while its 17 per cent share of British Columbia's market in 2011 climbed to 18 per cent in 2012. Crandall said Telus' advantage in Alberta can be traced, in part, to incumbent cableco Shaw Communications Inc.'s 2011 decision to forego building a wireless network. As a result, Telus is the only major provider in the province to offer “quad play” bundles for discounts to customers who subscribe to wireless, home phone, Internet and TV services. “Telus has home advantage here,” Crandall said. “Had come into the wireless space, then there would have been a lot more hometown competition.” Provincial Crown corporation SaskTel's dominance of the Saskatchewan market probably doesn't hurt either. The company commanded a 72 per cent share of the province's wireless subscribers in 2012, discouraging westward expansion into Alberta's markets from a rival telco in the East. Crandall said it makes sense for Bell and Rogers to target Alberta due to its high incomes and economic growth, which he said contributed to the province's nation-leading mobile penetration rate of 98.2 wireless devices for every 100 people. Telus had an estimated $1.7 billion in wireless revenues in Alberta in 2012, while Rogers revenues were $808 million and Bell's $775 million, The Wire Report's analysis of the CRTC data shows. Provincial revenues were calculated by multiplying monthly average revenue per user (ARPU) numbers by each provider's percentage market share, times 12 months for an annual figure. Bell and Rogers, Crandall said, could potentially benefit from anti-incumbent consumer sentiment in the province, which could help them steal customers from Telus. He said it could also be easier and cheaper for wireless companies to steal unsatisfied customers away from an incumbent provider than attract late adopters who have never before owned a cellphone. “My gut tells me it's probably cheaper to get a switch than it is to get a brand new ,” Crandall said. “With a switch, there's probably a reason they're switching ... it comes down to price or service and in either case they're disgruntled.” For its part, Telus won't sit back and let Bell and Rogers walk away with its most lucrative customers. In May, the company said it would spend $700 million in the province this year, on wireless technology, fibre-to-the-home infrastructure, and rural broadband. “Telus is competing hard everywhere. We're making significant investments in infrastructure, to expanding into rural areas,” Telus spokesman Shawn Hall said in an interview. “We see growth potential in all corners of Canada.” Telus said it would spend $1 billion in British Columbia this year on wireless, fibre, and rural broadband infrastructure, more than in any other province. Those investments could be seen as a move to stave off Bell's heightened interest in B.C., where the province's 3.7 million wireless subscribers produced an average of $63.52 in wireless revenues each month in 2012, second-highest among the Canadian provinces. Telus made $1.12 billion in wireless revenues in the province in 2012 with its 40 per cent share of the market, up from 39 per cent in 2011, while Rogers made $1.1 billion with its 39 per cent share of the market, down from 42 per cent in 2011, according to The Wire Report analysis. While Telus held a firm grasp of the country's most lucrative wireless subscribers in Alberta, Rogers continued to hold a leading position in Canada's most lucrative market: Ontario. Rogers took $3.5 billion of Ontario's $8 billion in wireless revenues in 2012, with 44 per cent market share, which had fallen from 47 per cent in 2011. Bell raised an estimated $2.2 billion in wireless revenues in Ontario in 2012 while holding a 28 per cent market share, which was unchanged from 2011. Telus had $1.6 billion in wireless revenues in the province last year with a 20 per cent share that climbed from 19 per cent a year earlier, according to the analysis. With penetration rates of 80.3 devices for every 100 residents in Ontario, there were about 2.6 million untapped customers in the province who didn't own a wireless device in 2012, second only to Quebec's 2.7 million, according to the new CRTC data released in late September. Quebec, where wireless carriers had average ARPU of $51.95 in 2012—the lowest in the country—also had the lowest penetration rate in Canada with 66.8 devices for every 100 residents, matching a pattern that connects penetration rates and revenues across the 10 provinces. Thirty three per cent of Quebec's wireless consumers were Bell subscribers in 2012, and the company earned $1.1 billion of the province's $3.4 billion in wireless revenues, according to The Wire Report analysis. Rogers had $976 million in wireless revenues in Quebec in 2012 with a 29 per cent share of the provincial market; Telus earned $943 million with a 28 per cent share; and new entrant providers Videotron Ltd. and Public Mobile Inc. earned $336 million in provincial revenues with a combined 10 per cent share, up from seven per cent in 2011. East of Quebec, Bell continues to hold a strong lead in each of the Atlantic provinces, with market shares that ranged from 54 per cent in Nova Scotia's $502-million wireless industry, to 73 per cent in Newfoundland and Labrador's $290-million industry. Rogers and Telus earned $164 million and $265 million in wireless revenues across the four Atlantic provinces in 2012, respectively, while Bell earned $727 million, according to the analysis. Telus gained market share across each of the Atlantic provinces in 2012. Crandall said the company has been aggressively targeting parts of Atlantic Canada where Rogers does not have cable operations. “You know the saying: if you grew up in the East you move to the West,” he said. “Get them when they're young and then, when they move to Alberta and are being paid $180,000 a year, you've got them as a cellphone subscriber already.” —With reporting by Nicholas Kyonka at nkyonka@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Telus faces wireless battle in West as millions in East still unserviced

News | October 4, 2013

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Telus faces wireless battle in West as millions in East still unserviced

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