Growth in telecom to lag behind economy: Conference Board

According to the Conference Board of Canada, high debt levels and weak job prospects will make it difficult for Canadians to increase spending on telecom services in 2016, limiting industry growth. A new report said the"industry’s pace of growth has slowed remarkably in recent years, from an increase of more than per cent in 2010 to a mere 0.4 per cent” the Conference Board forecasts for 2015. That’s due to a decline in landline usage, disruption in the broadcast distribution sector and maturation in the wireless sector, given that 95 per cent of Canadians already have a mobile phone, the Jan. 26 report said. “Combined, these three factors account for a lot of the weakness seen in recent history. However, there is another key element to add to this mix – Canadian households’ difficult financial situations. Record-high indebtedness is weighing on consumers’ willingness and ability to spend more on telecommunications services,” the report said. SeaBoard Group telecom analyst Iain Grant questioned that conclusion, stating that while a slowing economy will put more pressure on wallets, that actually means spending on communications, which includes over-the-top services like that offered by Netflix Inc. or apps offering streaming sports content, is likely to increase. That’s because, for example, it’s cheaper to have drinks and watch the hockey game at home than at a pub. “When money is short, there are many ways to use communications services to continue to enjoy the things you enjoyed when times were more flush,” he noted in an email. The report said that “with the sharp increase in telecommunications prices that Canadians have had to bear in the past two years (particularly in the wireless segment), we may have reached the point where every extra dollar spent on wireless is diverted from other types of telecommunications services, such as paid-TV and wireline phone service.” As Canadians are reshuffling their telecom bundles, it will be most difficult for them to reduce spending on Internet services because of the growing consumption of online content, the report noted. “Robust increases in telecom prices are thus happening at a time when consumers’ finances suggest they are least likely to be able to cope. As a result, we expect Canadians will continue to review their telecom packages in coming months, eliminating unnecessary options along the way,” the report said. “This, in turn, will contribute to further declines in the number of subscribers to wireline and, potentially, to TV services and will also weigh on the industry’s growth.” The report said that the outlook for business customers looks better than that for households, especially in the manufacturing, transportation and warehousing sectors. Gerry Wall, an Ottawa-based consultant who specializes in telecommunications and media, said in an email that following strong growth in telecom, he would expect a slowdown “as a natural part of its cycle.” He said he agreed there will be “some consumer push back due to rising prices,” but there will also be continued strength in some areas, such as mobile data. “In fact this sector – and possibly broadband – could quite possibly carry overall telecom into ‘better than national economic growth,’” he said, adding he “wouldn't bet against the strength of mobile data growth.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Charelle Evelyn at cevelyn@thewirereport.ca

Growth in telecom to lag behind economy: Conference Board

Broadcast | February 3, 2016

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Growth in telecom to lag behind economy: Conference Board

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