Bell-branded wireless hits sub-1% churn, continuing industry trend

The expected focus by the country’s largest wireless service providers this year to keep the spoils of last year's record postpaid wireless subscribers has so-far propelled two of those companies to a milestone achievement: a postpaid wireless churn of under one-per cent. BCE Inc. is the latest to achieve the feat, reporting on Thursday that the rate at which customers left its Bell-branded product -- not including its flankers -- was 0.98 per cent in the first quarter of 2019, its lowest ever. Rogers Communications Inc. reported in the first quarter a churn rate of 0.99 for all its wireless brands, also its lowest ever. Telus Corp. has held a sub one per cent churn for several years, at one time having a difficult-to-sustain sub-0.8 per cent churn. The latest churn figure from Bell continues a trend that Shaw Communications Inc. has said was the reason for some recent advertising suggesting the Big Three are gouging customers with high prices for fewer services -- and laughing about it. Shaw noted that their competitors were focused ever-more on keeping customers loyal to their brands. On previous conference calls, some telecoms have created a bull’s eye around the sub one per-cent churn goal. Shaw’s Freedom, which has previously poked the bears and ignited price wars, posted a 30 basis-point improvement in wireless churn last quarter, despite still being over one per cent. The trend of managing churn better by improving customer service or network quality, especially ahead of the roll-out of the next generation of networks, comes on the heels of a record year for the telecoms: the five major publicly-traded wireless service providers added just over 1.4 million total new subscribers in 2018. The focus is increasingly on keeping those gains within the ecosystem. One way of doing that is getting customers’ feet in the door first. This week, Bell announced that it secured 1,200 Dollarama stores in an exclusive distribution agreement to sell the prepaid SIM cards of flanker brands Virgin and Lucky Mobile -- a move in-line with Dollarama’s appeal to the low-cost-conscious consumers. The idea is to introduce the customer to the company through a prepaid service, get them comfortable with the brand, and ultimately migrate them to longer-term, higher-paying postpaid contracts. Bell’s chief financial officer Glenn LeBlanc said as much ahead of the release of the low-cost prepaid Lucky product, which was a hit with the competition-focused Innovation Minister Navdeep Bains. Bell said Thursday that it saw prepaid sales in the quarter increase 56 per cent over the year. “We hope those clients will migrate from Lucky Mobile, up to a product like Virgin or ultimately Bell, on the postpaid side,” Cope said at Bell’s annual general meeting following a call with analysts. The company lost nearly 12,000 prepaid subscribers, part of that being migrations to postpaid. Overall postpaid churn, including Virgin and Lucky, was down six percentage points to 1.07 per cent, its lowest postpaid churn in 15 years. The average billing per user was up 1.2 per cent to $67.35. Barclays analyst Phillip Huang said in a note he believes that’s due to a focus on retention versus gross additions as consumers “become less excited by new handset releases.” He added while there were some increased promotions in April, “we currently assume the industry will see fewer postpaid net adds for 2019.” The company added roughly 50,000 new postpaid customers, down from 68,000 in the first quarter last year. The decline this quarter reflects fewer government additions related to Bell’s contract with Shared Services Canada, and the additions from the holiday promotions last year that were sparked by Shaw’s Big Gig offerings. The total wireless subscriber base was up 3.1 per cent to nearly 9.5 million subscribers, with the postpaid segment increasing four per cent to 8.8 million. Shaw’s Freedom, too, has been focused on increasing its distribution. It has expanded its presence in corporate and retail stores, including Loblaws. The Western Canada-based company said in its last quarter that it is still early days to make a determination on whether or when it will have a premium, Shaw-branded wireless product. The race to market brands and record low churn figures are putting a spotlight on an increasingly formidable fourth player out of Calgary. Shaw is in the middle of a rollout of its 700 MHz spectrum that it said will improve its LTE network -- a historically limiting factor that the bigger telecoms have said put it at bay. The company is now in possession of recently purchased 600 MHz spectrum, which will help it continue its expansion efforts on 4G LTE, while preparing it for the launch of the 5G network. Bell said it declined to bid on that spectrum, saying it has spectrum necessary to excel in this generation and the next. Cope added that the 3.5 GHz spectrum, the auction for which is slated for next year, will be “more strategic.” The federal government is currently contemplating how much of that spectrum it should claw-back, with Bell and Rogers holding the largest amount of the frequencies under the Inukshuk partnership. Bell’s first quarter also added fodder to the discussion about traditional media’s possible rejuvenation. Last month, Corus Entertainment Inc. announced that a large cohort of 50 advertisers has been reintroducing investments into linear TV, helping the company steer the ship in more calm waters after a year of disappointing TV ad figures. George Cope, Bell’s CEO, corroborated that shift in advertising. Despite an overall advertising decline of 1.3 per cent, due largely to weaker radio, Bell reported TV advertising increased one per cent because of strong entertainment and news specialty content and stable conventional TV advertising revenue. “Our top 20 advertisers spent about 14 per cent more in the quarter than they did a year ago and we, as one of our other peers has mentioned, are seeing some strong revenue growth from clients moving back into some of our media properties,” Cope said on the call with analysts. “It’s our third-consecutive year-over-year advertising growth, and I will tell you this funnel for Q2 looks very strong indeed in terms of media.” In an environment where flat is the new up, as one analyst described it, the media advertising uptick was a marked improvement over traditional declines. Bell has the license to broadcast HBO content on its Crave streaming service, which is able to deliver one of the most-watched shows in the space: Game of Thrones. The season eight premiere of the show saw 3.3 million Canadians tune in, according to audience measurement company Numeris, making it the most-watched broadcast in entertainment specialty and pay TV history, a Bell release said. Cope said, for perspective, that would be approximately 10 or 15 per cent ahead of hockey’s Stanley Cup final. Entertainment specialty TV ad sales were also up 11 per cent year-over-year, Bell said. With the company’s TSN sports channel, basketball saw a 50 per cent increase in ratings over the year -- helping drive that is the Toronto Raptors current playoff run. Total media revenues declined 0.5 per cent to $745 million. The company added 24.9 per cent more retail internet subscribers, or 22,671, for a total base of 3.4 million, up 3.9 per cent. It also added 20,916 retail IPTV subscribers in the quarter, a 54.1 per cent increase, for a total of nearly 1.7 million subscribers, which is up 7.5 per cent over the year. Bell lost fewer satellite TV subscribers this quarter than last, at 22,476, but the overall base was still down 7.6 per cent to roughly 1.07 million. Overall company revenues were up 2.6 per cent to $5.7 billion, with net earnings up 11.6 per cent to $791 million. — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Bell-branded wireless hits sub-1% churn, continuing industry trend

Broadcast | May 2, 2019

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