Slower growth ahead for Canada’s communications sector: Conference Board

An increasingly competitive market will lead to slower growth for Canada's communications companies, according to a recently released Conference Board of Canada report. Canadian Industrial Outlook: Canada's Telecommunications Industry - Spring 2007 notes that despite higher levels of competition coming from cable operators entering telephony and the deregulation of incumbent telephone companies, sales - referred to as production by the Conference Board - will continue to increase at a modest pace between 2007 and 2011. Equally, profits are expected to grow at a slower pace over the next four years. The Conference Board report, released on April 26, indicates that while industry profits will increase from $3.7 billion in 2006 to $4.3 billion in 2007, growth will be muted during the ensuing four years with profits only hitting $4.6 billion in 2011. The study points to a number of reasons for the slower growth. Consumer communications spending rose only 2.4% in 2006, countering "a trend that had been ongoing for many years, which saw a steady increase in communications' share of total consumer spending." As well, communications services sales have only increased on average 1.3% over the past two years due to steady decline in the number of conventional household telephone lines. Sales will rebound to a degree over the next four years averaging 2.8% as a result of increasing demand for premium services such as digital television and text messaging. Although there has been tremendous growth in alternative providers' subscriber numbers - whether from the cable companies or the increasing number of wireless-only households - this won't have a big impact on future industry growth. "It is important to note that this marks a shift in market share within the industry and not a net loss of market activity. This increased competition is certainly influencing industry prices, but it has not fundamentally altered the outlook for production growth," reads the report. Services from alternative providers could also result in some price erosion, according to the Conference Board, and this could have an impact on overall industry revenue. While revenue rose by 5.1% in 2006, it will average 3.4% per year from 2007 to 2011. "The increasing prevalence of bundling will allow companies to regain some pricing power, because it will allow companies to compete on their suite of services, rather than just price," the study states. "However, rising production will be the main driver of growth, as consumers and businesses are expected to use more of the new premium services." This report used to be part of the Conference Board's broader study on information and communications technology, but will be now published twice per year as a stand-alone report.

Slower growth ahead for Canada’s communications sector: Conference Board

News | April 27, 2007

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