Market has adjusted to 2-year wireless contracts: analyst

Third-quarter results indicate the mobile market has adjusted to the higher-priced, two-year contracts that became the norm after the CRTC implemented the wireless code in 2013, says Scotia Capital telecom analyst Jeff Fan. In a research note issued Monday evening, Fan said this assertion is based on data showing that, for the first time in three years, all the publicly traded wireless carriers in Canada combined reported higher net gains for postpaid customers than a year earlier. "We note that this was not driven by a shift from pre-paid because pre-paid net additions were also positive for the first time in two years and for only the second time in four years," Fan said. He said the postpaid figures show the wireless market has probably gotten over pricing disruptions caused by the wireless code's rules that prevented penalties from being imposed on customers that left a contract after two years. Up until then, three-year contracts had been standard. However, he said the "double-cohort" — the effect of many three- and two-year contracts expiring at around the same time as a result of wireless code rules — was apparent in the third-quarter results, as there were more gross additions of postpaid accounts and customer churn among wireless carriers than previous quarters. "We believe this will likely continue into the 2015 holiday season as well," Fan said. His figures showed Rogers Communications Inc. had the highest share of gross postpaid additions among wireless incumbents in the country during the third quarter at 39 per cent, followed by BCE Inc. at 35 per cent and Telus Corp. at 26 per cent. Fan said Rogers' performance was supported by "traction" in the sale of plans where data can be shared among multiple devices, and he is looking to see whether Bell and Telus promote these kinds of deals more forcefully going into the winter holiday season. He said that while data-sharing plans tend to be negative for average-revenue-per-user (ARPU) statistics, they are also higher-margin largely because they involve fewer device subsidies as they are often used for devices that were already owned by users. He said Bell led the Big Three with six per cent growth, year over year, in ARPU in third quarter. He said Bell achieved this with higher-priced plans, more data usage among customers, a better concentration of postpaid customers compared to prepaid and a gain in Alberta market share. It was pointed out that Telus led in the area of customer churn in wireless with a rate of less than one per cent for the ninth straight quarter. Looking at the TV-service market, Fan said Cogeco Cable Inc. was the only cable company during the most recent reporting period that saw its rate of TV subscriber losses in Canada decline from a year earlier. Cogeco said it lost 9,619 TV customers in its fourth quarter ended Aug. 31, down from a drop of 10,666 in the same quarter a year earlier. Fan said Cogeco's use of set-top boxes from TiVo Inc. is helping it retain customers. He said telephone-line-based IPTV providers are continuing to gain subscribers at the expense of cable providers. He said Telus and Manitoba Telecom Services Inc. — the main IPTV providers in the West — gained a combined 25,000 TV customers during the last quarter, while their main cable competition, Shaw Communications Inc., lost 35,000. In the eastern part of the country, Fan said cablecos Rogers, Cogeco and Quebecor Inc. lost a combined 42,000 TV customers while Bell gained 26,000. Bell has now surpassed Shaw as having the most TV customers in the Canada. Fan said the bundling of TV with Internet service is helping Bell and Telus win more broadband customers. He said that "with the broadband Internet market still growing, cablecos are seeing positive broadband Internet subscriber additions. But the gains of cablecos would be much higher if they were more competitive in their TV offerings." He noted that, in the coming months, Shaw is expected to launch its X1 TV platform, in cooperation with U.S. service provider Comcast Corp., and Rogers is set to start operating its IPTV service. Last June, Barclays Capital analyst Phillip Huang said such innovations among cable companies will help them "level the playing field" against telcos' TV services. Recent data released by Media Technology Monitory (MTM), a project of CBC/Radio-Canada, showed anglophones in Ontario have a lower rate of IPTV adoption than the rest of the country, with Rogers' established position as TV-service provider in this province, and its ability to bundle TV, wireless, Internet and home phone to customers, cited as factors. — With reporting by Derek Abma at dabma@thewirereport.ca and editing by Shruti Shekar at sshekar@thewirereport.ca

Market has adjusted to 2-year wireless contracts: analyst

News | November 10, 2015

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Market has adjusted to 2-year wireless contracts: analyst

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