Wireless gains to continue in 2017: RBC

Momentum that Canadian telecoms saw in their wireless divisions over the previous two quarters is expected to continue into 2017, according to an analyst note by RBC Capital Markets. The high levels of overall activations reported by wireless operators that began in the second quarter and exceeded analyst expectations were driven by lower churn and growth in new postpaid subscribers, but exact reasons for the “sudden increase…remain unknown,” Drew McReynolds said in a Friday evening note. Companies, reporting their third-quarter results, pointed to factors including higher LTE penetration, an increasing number of handsets, wireless adoption by a younger demographic, immigration and a stronger economy, McReynolds highlighted. Average revenue per user (ARPU) growth was also better than anticipated, McReynolds said. For Rogers Communications Inc. and Telus Corp., “we believe a portion of the ARPU growth can be attributed to ‘Premium Plus’ plans launched in July and August,” where customers pay less upfront on handsets but pay more monthly. On the wireline side, the note highlighted that the third quarter this year was the first since the second quarter in 2013 where new cableco Internet subscribers “noticeably exceeded that of the telcos.” McReynolds says it’s unclear whether “the current pace of deployment by and Telus is sufficient to offset Internet net losses outside FTTH footprints.” Though he expects the telcos to “remain very strong” within their FTTH footprints, McReynolds said those non-FTTH areas are likely to face pressure as “household data demand steadily increases, 1Gbps is widely offered by the cablecos within the next year” and cableco Internet “attach rates” — the uptake of one product because of another — “rise as new cable video platforms are deployed.” For television, McReynolds said the “key challenge” for distributors is “evolving current television offerings” to appeal to both households with and without TV service. As households shift to the Internet, new TV offerings will be less effective in both retaining and getting households and “recapturing meaningful market share from competitors,” he said.

Wireless gains to continue in 2017: RBC

Brief | November 14, 2016

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