Pre-paid and acquisition costs dominate wireless carrier results

The story of the Canadian wireless industry over the last few quarters has been the growing significance of the pre-paid subscriber and the rising cost of acquisition (COA). The trend held true in Q1 of 2006. Subscriber results reveal that the pre-paid market is turning into a battle between just two carriers (see chart on page 7 for more details) with Bell Mobility and Telus Mobility adding to their base while Rogers Wireless continues to lose pre-paid subs from its ranks. Rogers’ executives, however, make no bones about focusing on the post-paid market, leaving the pre-paid to the other players. "Our focus is very clear: it is on post-paid. It’s on quality of subs. It’s on ARPU growth and churn reduction," Nadir Mohamed, president and COO of Rogers Communications, said during the company’s first-quarter financial results conference call. "And we’re not going to be distracted from that." Bell Mobility’s Robert Odendaal noted during the company’s Q1 conference call with analysts that Virgin Mobile Canada is performing well, especially with the type of customers it is adding. "They are adding higher value than we typically have in our base and that’s helping to improve our overall pre-paid segment results," he said. Despite Bell’s increasing number of pre-paid customers, the company maintains it is focusing on the post-paid market. Odendaal noted overall gross additions were 17% and in fact were up 12% year over year in post-paid, adding this is a material improvement. Telus Corp. CFO Bob McFarlane highlighted the positive impact of higher COA during the company’s Q1 conference call, noting that the Spark and ’Net on the Fly initiatives paid dividends as the company experienced an 86% year-over-year increase in wireless data services. Data contributed $3.71 to ARPU of $60. Not only did increased promotional activity bring overall COA up, but increased competitive rivalry will not go unanswered. McFarlane says the company will be aggressive in responding to pricing offers from competitors.

Pre-paid and acquisition costs dominate wireless carrier results

News | May 18, 2006

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