The acquisition of Microcell Telecommunications Inc. by Rogers Wireless Inc. won’t likely have too great an impact on pricing in the highly competitive mobile wireless industry, according to analysts. In the short- to medium-term, pricing will probably stay the course as Rogers Wireless determines the best possible course of action in migrating Fido subscribers to higher-rate packages, say observers. Mark Quigley, research director of Canadian Market Strategies at the Yankee Group, says that if Rogers moves too quickly to switch subscribers it risks a spike in churn since the majority of Microcell’s subscribers are on lower rate plans and aren’t locked into a contract. "It’s going to take some time for Rogers to change some of the bad pricing behaviour that Microcell had started, so there’s going to have to be a transition period for those Microcell customers…They’re going to want to spend some time trying to do that as smoothly as they possibly can.  Once they’ve been able to get through some of those things, maybe shed some of those low-value subscribers, then I think we can look forward to increasing pricing discipline across the market," he tells Report on Wireless.  Brian Sharwood, principal at the SeaBoard Group, agrees that there won’t be any significant pricing changes in the short-term, but for different reasons. He says pricing has been aggressive across the board lately and will likely remain that way in the near term.  Even in the long term, he adds, "I’d be skeptical to say that we’re going to see price increases. In the medium term, I think we’re going to have a more robust (mobile virtual network operator) market, which will keep people honest. And then in the long term, I think we’ll see other forms of wireless communications such as WiMAX, the voice over IP style of communications, which will again add to the competition in the market."  Over the years, Microcell has been the most aggressive price leader in the market. Since emerging from bankruptcy protection and getting its financial house in order, the Montreal-based provider introduced some of its most innovative pricing strategies, including CityFido – free unlimited incoming calls, and anywhere local calling. Earlier this fall, Microcell went a step further by unveiling a new plan that effectively turned the entire country into a local calling area (RoW, Sept. 22/04). The package also includes 850 North American long distance minutes.  "We felt that business executives who traveled mostly in Canada did not benefit from a package that best fit their needs and at the same time have it at a cost that was affordable, and that’s when we developed this new price plan where, for the first time, we give unlimited calling wherever you are. Whether you’re based in Toronto and you’re doing business in Vancouver, Ottawa, Montreal or wherever, you can talk locally as much as you want," Microcell’s director of marketing told Report on Wireless at the time.  There was speculation that Rogers Wireless wouldn’t proceed with further launches of CityFido because it considered the home phone replacement initiative uneconomic, but this week the program was expanded to the greater Montreal area. The company never ruled out continuing with the program, but it was suggested Rogers Wireless wouldn’t continue with the aggressive pricing.  Nadir Mohamed, president and CEO of Rogers Wireless, said in a September 20 conference call announcing the acquisition agreement with Microcell’s management team, that he liked the idea of CityFido being able to compete against the incumbent telcos in the home phone market.  Sharwood says that Rogers Wireless recognizes the value that CityFido brings to the market (Sharwood’s comments were made to Report on Wireless in an interview prior to Rogers Wireless’ decision to launch CityFido in Montreal).  "…what Rogers has been saying is that they are committed to continuing the CityFido brand, continuing that forward and expanding it to other cities and doing the things that Fido is doing, which is disrupting the market. The thing that Rogers can do now is they can work in concert with it. They can tailor their advertising and their brands to one particular market and leave Fido to target another market. Certainly, Rogers growth wasn’t particularly affected by the Fido brand itself, which clearly says there are two different markets there – people who like Rogers and people who like Fido – and I don’t think they want to mess with that quite yet," Sharwood explains.  Quigley says that Rogers Wireless is likely exploring ways to scrap the initiative (his comments came before the Montreal launch). "They’ll have to do something one way or another whether it’s to transition those guys so that they are paying much more a month for a fixed number of minutes. I think that when Rogers looks at the product they see it as being an interesting product, separate of how much is being charged for it, the notion of wireline displacement, the wireless handset being the only communications device that people have," he says.  Wireless is a powerful tool in the competitive landscape, Quigley suggests, referring to Yankee Group’s research on bundling. "It becomes a very good baton to use. Any of the surveys that we’ve done suggested that if you throw wireless into that bundle, that bundle with wireless, local, long distance, TV and Internet is certainly preferred over any other bundle," he says.  With the industry’s most aggressive pricing player leashed and the prospect of a three-player market going forward, there is speculation that subscriber growth in the industry could slow down. Bell Mobility, Telus Mobility and Rogers Wireless have largely ignored lower value customers, focusing instead on profitable growth, and this could possibly lead to stunted subscriber net additions.  "Possibly," says Quigley when asked about the potential of the Rogers Wireless/Microcell combination to have a negative impact on subscriber growth. "I guess to a large extent it depends on what Rogers is going to do with Microcell as a brand," he says.  Sharwood suggests that there won’t be any impact on subscriber growth because there are still four players in the market, it’s just that two of them are controlled by the same company. "I think that the pressure to continue to go after customers is still strong. We’ve still got a long way to go in our penetration in this country. We’re still at only about 50% - if that - and countries like Sweden are at over 100%, so we’ve got another 15 million customers to get.  There’s a long way up and we’re still even 10% to 15% behind the U.S. in terms of penetration. Minutes of use are still low in this country, partly because of the pricing plans and things like that," he maintains.