TORONTO – A new fourth player in Canada’s wireless industry combined with increased wireline competition are two factors poised to significantly impact the Canadian telecom industry in 2016, says Canaccord Genuity.
An industry overview released Wednesday by analyst Aravinda Galappatthige says that company is taking “a more cautious stance” as it considers this year’s outlook for the telecom stocks, particularly when it comes to the big three incumbents BCE, Telus and Rogers.
Galappatthige predicts that wireless competition will heat up as a “resurgent Rogers Wireless” continues to aggressively add wireless net additions, and as regional player Videotron Wireless advances towards its long-term goal of acquiring one-fourth of Quebec’s subscriber market share. But Shaw’s “unexpected” acquisition of feisty wireless upstart Wind Mobile last month also merits a close watch.
“At the outset, we believe that Wind would likely be more potent in Ontario (where Rogers has 45% market share) where it has greater brand awareness”, reads the note. “However, as we get to late 2016 after Wind has completed its 3G upgrades in the west, we expect more innovative product offerings alongside Shaw’s services (Wi-Fi, bundling, etc.). Moreover, over the next 12-18 months we expect Wind to add the iPhone to its device catalogue and commence its LTE rollout – two critical steps in order to effectively compete with incumbents.”
Competition in the wireline sector will also intensify, continues Galappatthige, as the telcos continue to gain market share from the cablecos.
“However, as we get towards the latter half of 2016 we are likely to see the initial impact of the upgraded TV platforms of Shaw (X1 Xfinity) and Rogers (proprietary IPTV platform)”, continues the note. “Considering the extended period of share loss experienced by the cablecos, one can only expect heightened competitive action on their part as the year progresses, which could have the ultimate result of added ARPU pressure and higher promotional spend.”
The implementation of TV channel pick and pay this year will also apply pressure the video component of the wireline segments by weighing down revenues and ARPU. “While most of the companies do not report their TV exposure, we generally estimate this to be around 35-40% of wireline revenues”, he adds. “Rogers, BCE and Shaw have meaningful exposure on this front.”
