Virgin Mobile Canada beneficiary of three-player market in Canada?

Two analysts are divided about whether the potential elimination of Microcell Telecommunications Inc. from the competitive landscape would be a boon to Virgin Mobile Canada. They agree, however, that Virgin Canada will have greater leeway in the market without pesky Microcell in the picture. Rogers Wireless Inc. announced on September 20 an agreement to acquire Microcell for $1.4 billion in cash, trumping a proposed $1.1 billion price from TELUS Corp. Ian Angus, president of Angus TeleManagement Group, doesn’t believe Virgin Canada would be affected to a great extent by the elimination of the country’s smallest operator from the scene. "From Virgin’s point of view, and Virgin is a marketing play, I don’t think it would have made a difference given that they are using Bell Mobility spectrum anyway," he tells Report on Wireless. Johanne Lemay, co-president of Lemay-Yates Associates doesn’t agree. "If Microcell would be acquired, I think it would be positive for them in terms of having less competition in what we anticipate they will focus on," she says. Angus does concede, however, there will be more maneuvering room if Microcell disappears. A market without Microcell "gives Virgin more of a free hand in the pre-paid youth market. But in some ways, Microcell has been moving away from the pre-paid market," he says. Last month, Microcell revealed in its second quarter figures that gross subscriber additions were heavily tilted toward the post-paid side. It recorded a 66-34 split for the quarter ended June 30, 2004. The company increased its post-paid/pre-paid guidance for its third quarter on September 14 to 68-32 split. Virgin Canada management is remaining tight lipped about the potential impact on it of Microcell being acquired. Andrew Black, president and CEO of the company declined to comment on the effect on Virgin Canada of the country’s smallest national operator possibly disappearing from the competitive landscape. Details of Virgin Canada’s plans have yet to be unveiled, but they will be focused on the youth market segment using pre-paid calling packages. The company, which partnered with Bell Mobility this spring to enter the Canadian market (RoW, April 7/04), hasn’t revealed its official launch date, only saying that it will be later this year. Analysts who spoke with RoW at the time of the Virgin Canada/Bell deal said Microcell is in the worst position of any of the other national operators because of its large exposure to the pre-paid segment. "If the arrival of Virgin Mobile doesn’t stimulate any growth in the market and you assume zero sum gain, then the majority of their growth is coming out of the pockets of their competitors," Peter Rhamey, a BMO Nesbitt Burns analyst, said in April.

Virgin Mobile Canada beneficiary of three-player market in Canada?

News | September 22, 2004

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