Good news/bad news for wireless industry growth

Despite its dubious distinction as the developed world’s wireless laggard, Canada’s mobile industry could really take off in the next few years, according to financial investment experts. But many challenges could also confound this potential upward mobility. Financial and industry analysts aired their concerns and hopes for the sector at a Canadian Wireless Telecommu-nications Association (CWTA) conference held in Toronto May 16 and 17. The pundits envision a good news/bad news future for wireless in Canada. Certain aspects of the industry are positive. Revenue from wireless services account for 30% of the sector’s overall count, up from about 20% a few years ago, noted Lawrence Surtees, principal analyst, communications research at IDC Canada Ltd. With wireless penetration slightly above 50%, there’s plenty of room for growth in Canada. But there are problems with having a lower penetration rate. It suggests that Canadian carriers might have a hard time convincing non-wireless users to sign up for service. There are also concerns that wireless data services such as mobile video might not be the revenue bonanza that service providers expect. Glen Campbell, global co-ordinator, telecom services research at Merrill Lynch, pointed out that while such applications increase revenue for carriers, they bring extra costs for both users and carriers. Customers have to acquire new phones and service providers have to buy new back-end equipment to support such bandwidth-hogging applications. As well, there are no guarantees that consumers will use these services. Technologies such as Fixed-Mobile Convergence (FMC) represent a big question mark too, which could result in customers choosing to make mobile calls at cheap Wi-Fi hotspots. "We think long term, there is a risk here," said Campbell. Peter Rhamey, managing director, telecom equity research at BMO Nesbitt Burns, wondered if wireless data services would affect voice revenues. In the future customers could purchase data services, install VoIP clients on their phones and use voice over data to make calls, thereby avoiding the per-minute charges of traditional calling. Rhamey predicted a big change for some service providers. "I would argue that CDMA players…will have to migrate to GSM," he said. Handset manufacturers generally offer GSM versions of new devices well before they get around to making CDMA iterations available. As consumers seek to own the latest and greatest phones, they might decide to purchase services from GSM providers, just to maintain that product edge. CDMA operators might have to change their network technology in order to keep up with demand, Rhamey said. The good news? "I see the industry becoming more mobility-centric," Rhamey said. Carriers losing their once-stalwart revenue streams such as local and long-distance wireline services are turning to wireless to shore up the bottom line. As well, stable three-player competition among Bell Mobility, Rogers Wireless Inc. and Telus Corp. provides "a much more rational, competitive environment where you can put price increases through," Rhamey said. Surtees suggests wireless subscriptions in Canada would overtake wireline subscriptions in the 2008 time frame. Rhamey said wireless revenue would represent 60% of the whole industry’s take-in by the end of the decade.

Good news/bad news for wireless industry growth

News | 06/01/2006 4:00 am EDT

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