TORONTO – By the end of 2014 the new Canadian mobile providers will nearly double their total subscriber base to 3.2 million, or a 4% increase in market share compared to the 1.73 million base they should reach by this year’s end. This according to a 102-page report entitled Canadian Wireless: Assessing the Impact of New Entrants by the Convergence Consulting Group.
The report however cautions that the “outcome of the 700 MHz auction, Shaw’s potential wireless entry, the possible merger or sale of certain new entrants, are all pivotal variables.”
Driving this growth is how new entrants can undercut incumbents and their discount brands by more than 50% (not including promotional pricing), on combined voice/data pricing and by more than 80% on data alone. But it also found that when it comes to voice pricing, incumbents and their discount brands have in many cases come close to matching (in some cases undercut) the new entrants. The lower prices are also spurring wireless substitution, which the report forecasts will grow to 25.4% year-end 2014, from 18.2% year-end 2012.
It estimates Canadian wireless service ARPU (weighted) will decline by 0.2% in 2012 (down from 0.9% in 2011), driven by a 9% drop in voice ARPU (down from 10% in 2011). ARPU will eventually recover however, and the research forecasts a decline of 0.1% for 2013, and growth of 0.3% for 2014. Convergence forecasts a 24% data revenue growth for Canada’s big three incumbent wireless providers in 2012 and estimates Canadian wireless subscriber smartphone penetration will reach 55% by the end of 2012, up from 43% in 2011 – and reach 65% by the end of 2013.
It forecasts that cable new entrants to wireless (Vidéotron and as-yet-to-launch EastLink) will on average be EBITDA positive and have positive pre-tax operating free cash flow in their third year of operations (excluding spectrum expenditure) and five years on average for independents (Wind, Mobilicity, Public Mobile). It forecast positive cumulative pre-tax operating free cash flow on average for cable new entrants in year ten; on average in year fifteen for independent new entrants.
