Freedom answers to ‘unlimited’, offers $0 phones on select plans

Shaw Communications Inc.’s Freedom is responding to the wireless industry’s recent moves toward removing data caps and offering $0 upfront financing plans by throwing-in select devices at absolutely no charge on certain plans. The back-to-school promotion from the perennial wireless market disturber includes unlimited data plans starting at $50 for 10 GB per month (including the $5 digital discount) with speeds reduced after the data cap is reached. The Calgary-based company already doesn’t charge overage fees, so for the cherry, the company is giving customers select phones for free with certain unlimited plans. Last month, Rogers Communications Inc. became the first national carrier to offer “unlimited” data plans starting at $75 for 10 GB, which means customers would see slower speeds in lieu of overage fees if they exceed the data cap within the month. Telus Corp. and BCE Inc. followed suit with their own plans, and the latter this week bumped up its promo price for the plans by $10 to $85 per month. The other two giants stayed put with their pricing. Factoring the $5 discount and the 3 GB bonus data on all plans, Freedom’s $50 plan gets customers 13 GB of “unlimited” data and text and 5 cents a minute for calls in Canada; $10 more tacks on unlimited talk; $10 on top of that gets an additional 2 GB; $5 more adds an additional 3 GB; an extra $15 gets an additional 10 GB for a total of 28 GB with the bonus, leading to the company’s penultimate plan: 33 GB with unlimited talk and text within Canada and the United States for $115. And the more expensive the price plan, the better the free phone under the terms of the new “Absolute $0” plans. There are six eligible phones for the two-year contract deal: Apple Inc.’s iPhone XR and LG Electronics Inc.’s G8 ThinQ are $0 with a plan worth at least $75, the iPhone 8 and Samsung Electronics Co. Ltd.’s Galaxy S9 are $0 with a $70-plus plan, and Samsung’s A70 and A50 are free on $60- and $50-plus plans, respectively. By the end of the term, customers keep their phones. Shaw did not respond in time to questions about how long the promotion will go and about whether the company has a trade-in program at the end of the contract, as Telus does. “We believe these changes are consistent with a still constructive pricing and competitive backdrop for the Canadian wireless market following the launch of incumbent unlimited plans in June,” RBC telecom analyst Drew McReynolds said in a Thursday note. He noted that Freedom’s pricing is still cheaper than the incumbents, which he said is still in-line with the company’s growth projections. Freedom’s move, par for the course, undercuts the incumbents. It first brought higher data plans with its Big Gig offering in 2017, which started at $50 for 10 GB of data, unleashing a pricing frenzy later that holiday season. Now it is reminding the market of its influence by rebranding those plans to “Big Gig Unlimited.” “Freedom Mobile has once again rewritten the industry’s rules,” Freedom president Paul McAleese said in a press release. The company’s “Absolute $0” seemingly flies in the face of the equipment financing plans the incumbents have launched nearly simultaneously with the no-overage deals. Those plans allow customers to finance the purchase of a device at $0 upfront over the course of a two-year -- and in Rogers case, as long as three-year -- term. Taxes on the device would be due upfront, and the device would be paid in full over the term. This would help reduce the subsidies the telecoms pay to reduce the cost of the device and entice customers to pick one up through them. On Thursday, Bell announced details of its new equipment financing plan, called Bell SmartPay. Under the new structure, customers pay for their device over the course of 24 months at $0 upfront, interest-free. But it’s also keeping its subsidy model as an alternative, which splits the phone cost between an upfront cost bore on the customer and monthly payments coupled with the service plan. Freedom has long focused its efforts on minimizing “bill shock” by ensuring data overage fees are not a hassle for customers. In the middle of 2018, as the CRTC forced the Big 3 incumbents to propose low-cost data plans, Freedom introduced its own version undercutting the bigger players. The Big 3 subsequently doubled their initial data offers. Then, during last year’s holiday season, the company offered customers 100 GB of additional data at full network speeds. Empirical evidence showing Freedom’s knack for moving the rest of the industry was not lost on analysts. Canaccord Genuity analyst Aravinda Galappatthige said in a research note earlier this week that the “unlimited” price points of the incumbents -- generally at a floor price of $75 -- would advantage Freedom in that it could fill in price gaps that are generally left to the bigger companies’ flanker brands. He put that question to Rogers’ head Joe Natale during a second-quarter conference call this week. “We have done a very thorough analysis of the Rogers base and the opportunity for that base to sign up to the Infinite plans, and we're very happy with the delineation that we've created around these price points,” Natale said in response, adding “Fido is doing very well. “Now, at the end of the day, the market will continue to evolve. It's a dynamic market, but we're pleased with the way we're approaching it, and we're confident it's the right direction.” Galappatthige upgraded Shaw’s stock to buy in the note. The incumbents have generally shrugged at Freedom’s moves because of what they describe as the fourth-player’s fledgling network. But Freedom has been able to take comfort and exude confidence because it continues to deploy its network-improving low-band 700 MHz spectrum, which the company said will likely spill-over into 2020. The company also won 11 licenses for the 600 MHz band, largely considered important for 5G, worth roughly half a million dollars to cover 21.7 million people. At the time, Galappatthige saw it as a “paltry” sum for how much the company was getting: 78 cents per MHz. It will be a while, however, before it can deploy that spectrum, the company said. “With the billions of dollars we’ve spent rapidly improving our network and deploying new low-band spectrum, there has never been a better time for consumers to join Freedom,” McAleese said in the release. In fact, some of the incumbents have used Freedom’s increasing market share to claim that competition in wireless is just fine. Freedom has turned around and said the incumbents’ reaction to its moves is similarly reason to believe in the power of fourth-player pressure. To be sure, this year, Freedom announced that 1.3 million more Canadians in British Columbia, Alberta and Ontario will have access to its network. Last month, in its fiscal third-quarter conference call, Freedom credited itself for why all of these bigger and cheaper data plans were coming out into the market. Galappatthige noted the rapid punch-and-counter-punch nature of what has transpired over the past month would ignite a price war that could harm the wireless-heavy players like Telus and Rogers. However, he added in a subsequent note that the full effect may yet be seen in the next few quarters. McReynolds himself sees it a little differently. “Management indicated that Freedom's loading through June and July was tracking well despite the launch of incumbent unlimited plans, suggesting the competitive positioning within the Canadian wireless market, despite significant pricing changes, remains at a reasonable equilibrium that should provide enough room for both national incumbents and regional operators to grow.” — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Freedom answers to ‘unlimited’, offers $0 phones on select plans

News | July 25, 2019

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Freedom answers to ‘unlimited’, offers $0 phones on select plans

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