Telus considering reseller agreements, but remains leery of MVNO deals

The chief financial officer at Telus Corp. told a recent investors conference that the company might consider entering into wireless reseller agreements, but doesn’t see the value in mobile virtual network operators (MVNOs). Bob McFarlane, Telus’ CFO, made the comments during a January 10 session at the Citigroup 16th Annual Global Entertainment, Media and Telecommunications Conference. "We will engage with partners who bring a distribution capability and a value-add and want to sell our products through there on a mutually advantageous basis," McFarlane said. He singles out the wireless resale or distribution agreements that some of the country’s cable operators have signed with wireless carriers. When contacted for additional details on Telus’ strategy with respect to wireless resale and MVNOs, a company spokesperson told Report on Wireless that it would not comment any further on the matter. EastLink, the Atlantic Canadian cable operator, has a wireless resale agreement with Rogers Wireless, and Vidéotron ltée recently inked an MVNO deal with Rogers Wireless. It should also be noted that Rogers Wireless, Canada’s largest wireless operator, is under the same corporate umbrella as the country’s largest cable operator Rogers Cable. "They’ll be successful," McFarlane said of the cableco wireless resale agreements. "Why? Because they have customer relationships to be able to cross sell into that." McFarlane admitted that Telus has been reticent about entering into wireless resale or MVNO deals because the upside for the wholesale carrier isn’t there. "It’s very difficult in my view for these operators to be effective in the marketplace other than as a pure commoditized discount-price product," he said. "We will never give up retail price point of the products we sell." Inking a deal with an MVNO that is going to focus on price as its key differentiator doesn’t make a lot of sense to McFarlane. He likens such a move to taking a step backwards. Virgin Mobile Canada, one of Canada’s most well-known wireless resellers and a joint venture between Virgin Mobile and Bell Mobility, is doing well in the pre-paid market by all accounts, with an aggressively priced service. The company doesn’t release its subscriber results. While Virgin Mobile’s impact on the Canadian market is in the early stages, MVNOs are having considerable impact south of the border. Recent figures from the United States indicate that MVNOs are capturing an increasingly significant share of net additions and could hold as much as 15% of the US total wireless subscriber base, or many as 29 million subscribers by 2010, according to the Yankee Group. Despite McFarlane’s assertion that MVNOs will use price as the key marketing tool to gain subscribers, many of the newer entrants in the US are banking on content as the differentiator from traditional facilities-based wireless carriers. Amp’d Mobile is one example that is using entertainment, including music, video and 3D games to lure the youth market to its service. Marina Amoroso, an analyst with the Yankee Group, said during a recent web cast on MVNO strategies that Virgin Mobile, ESPN and Disney are prime examples of content-centric MVNOs (RoW, Dec. 1/05). "The mobile wireless space for them is another avenue to reach viewers of their content and entertainment," she noted. "So, their typical leverage with a customer is they try to offer a lifestyle brand; they try to personalize the wireless experience around the content and information that you, as the user, like. As a result, they make a very customized and personalized lifestyle experience which, to some users, is going to be very hard to turn away from." McFarlane admitted the US market is a different beast. "Unlike in the United States where you have five or six competitors in a market, the odds that someone else is going to it means that you want to jump ahead of the queue and do it yourself. In Canada we’re three , so I don’t think we have that same dynamic," he said, adding that "MVNOs are likely to be an immaterial part of the market."

Telus considering reseller agreements, but remains leery of MVNO deals

News | January 25, 2006

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