Wireless to buoy telecom sector: Conference Board

The traditional telecommunications sector is going to face some tough times over the next five years, according to the Conference Board of Canada, but solid returns from the wireless industry will buoy the telecom space."The telecommunications industry will continue to expand at a modest pace in the near term, though growth will decelerate to its slowest pace in more than a decade," reads the Conference Board's Canadian Industrial Outlook: Autumn 2008 for the telecom sector. "Rapid growth in demand for wireless services, as well as increasing use of newer services such on-demand television programming and mobile Internet surfing, will support growth."The rapid increase in smartphone usage in Canada is one of the factors behind strong wireless growth forecast between 2009 and 2013, according to the Conference Board. The introduction of handheld devices such as Apple's iPhone and the four new BlackBerries from Research in Motion this year will help sustain this growth."As a result of this trend, wireless carriers are altering their product offerings, and data services are accounting for an increasing share of wireless revenues," states the report.Wireless data revenue now accounts for a significant share of revenue for Canada's wireless carriers. Rogers Wireless, which has long been the leader in wireless data, noted in its third-quarter financial and subscriber results that wireless data revenue now accounted for 16.5% of overall average revenue per user (ARPU). Telus Mobility is catching up though, reporting third quarter wireless data revenue of 16% or $10.19 of $64.14 ARPU. Bell Mobility no longer breaks out wireless data revenue.The fruits of the telecom sector labour aren't all tied to the wireless industry, noted the Conference Board. Cable telephony has been a boon, but it's been a double-edge sword. On the negative side, it stimulated competition in the local residential landline market through price competition and didn't contribute to overall industry growth. On the plus side, it enabled greater bundling opportunities for the established cable operators. And those that enter the wireless market - Vidéotron ltée, Shaw Communications and EastLink - will have even more bundling options, says the report.Despite the solid returns expected from the wireless industry over the next five years, the real profit generator for the telecommunications sector will come from services other than wireless and wireline. The Conference Board notes that wireless prices will experience downward pressure as new entrants launch services and gain traction among consumers."Although the wireless segment will experience the strongest growth in terms of price-adjusted sales, the ‘other' segment - which includes things like telecommunications resellers, satellite communications, and television program distribution - will have the strongest revenue growth," reads the report. "This is because wireless prices are expected to fall over most of the forecast period, while prices for ‘other' telecom services are expected to enjoy the strongest growth, actually outpacing increases in broad inflation."Revenue and profits won't experience the same fate during the 2009-2013 forecast period, according to the Conference Board. While telecom industry revenue is expected to soar from just above $50 billion at the end of 2008 to more about $65 billion in 2013, profit growth for the sector will be modest. The report says that price competition from wireless will be a major factor limiting profit growth to 1.9% annually, increasing slightly from $7 billion at the end of this year to $7.7 billion at the end of 2013.

Wireless to buoy telecom sector: Conference Board

News | December 10, 2008

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