TORONTO – The fact that Wind Mobile has been able to see the type of growth its CEO describes as “amazing” shows a heavy demand for a wireless carrier that isn’t one of the big three or their flanker brands, Alek Krstajic told a conference last week.
And that pent up demand is populated with consumers who are willing to put up with a weak network, which Wind is working hard at bolstering, in exchange for lower prices and unlimited packages. “People want to see the underdog succeed,” said Krstajic, which is unlike the feeling he got when he worked for both Rogers and Bell where customers “liked to hate us.”
The company had its best growth quarter to date, the CEO told the Scotiabank Telecom and Cable conference held Thursday in Toronto, led by a test of a $39 unlimited package the company plans to push during the Christmas shopping season. However, because Wind is a private company, Krstajic did not let any hard subscriber numbers out into the open.
He did note, however, what it would take for his company to be considered a success in his and his investors’ eyes. Counting the churn rates of Telus, Rogers and Bell and their flanker brands, Krstajic said that means about 18% of Canadian wireless subscribers every year are looking for a new carrier. That’s about five million people “who are making a decision to leave Rogers, Bell or Telus or their flanker brands, so if we can get a decent percentage of those – and some of the (consumers) I refer to as ‘over-served’, who are actually having to take things at price points they don’t want to in order to get other things… if we can be more flexible, I think we can get a good chunk of that business.”
The sweet spot for Wind, he added, would be scooping 10% to 14% of the overall Canadian wireless market, with a mid-$40 average revenue per user (ARPU) per month. The big three have ARPU in the mid-$60s, leading to EBITDA margins that are some 10 percentage points higher than the U.S., he said.
While Krstajic would like to get 25% of the market, he knows that’s unrealistic because the other companies have a decades-long head start and to get to a quarter of the subscribers he would have to “tank the entire market to try to bring pricing way down,” which he is unwilling to do because everyone saw that a $25 price point for Mobilicity just ended up killing the company.
Despite the growth, recent AWS-3 spectrum auction wins, and Wind’s emergence as a solid #4 in Ontario, Alberta and B.C., the company needs more help from the government in order to provide sustainable competition and expand into LTE, he added. “We need low band spectrum and have to make sure there is set aside in the 600 MHz auction,” he said of the next auction, which is likely to happen in 2017.
“I can’t let George, Guy and Darren” convince the new Liberal government, “that we don’t need any more spectrum… We’re far from having what we need. We need a whole lot more.”
Krstajic noted that a man he used to work with, Edward Rogers (Ted’s son) recently tweeted, in response to a Globe and Mail story about Wind, that the company is only looking for more “taxpayer funded subsidies,” which Krstajic said Thursday: “Yes, just like your father did.” He finds a bit rich because Rogers, Bell and Telus got much of their original spectrum “free or next to free.”
“Edward’s a good friend, but don’t forget who trained me,” Krstajic reminded the delegates. “Ted trained me on these kinds of arguments,” when Rogers was originally pushing into telecom and wireless against Bell.
"What they’re doing is exploiting this oligopoly and at whose expense? Customers.” – Alek Krstajic, Wind
He added he doesn’t believe executives at the big three are “evil”, it’s just that they can’t be trusted because of their “addiction” to 49% EBITDA margins. “Are our (cellco executives) that much smarter that they’re going to get 10% more in EBITDA margins? What they’re doing is exploiting this oligopoly and at whose expense? Customers.”
If the federal government is serious about sustainable competition, he went on, it should say that “by 2020, we want to see Rogers, Bell, Telus and the fourth player in each market have roughly the same amount of spectrum,” Krstajic said.
If those fourth players in each market (Eastlink in the east; Vidéotron in Quebec but with spectrum holdings in Ontario, too; MTS in Manitoba and SaskTel in Saskatchewan) are serious about competing with the big three, they should all work together more often pushing for things like spectrum policy – not to mention getting together to try and get better prices on technology, too, said Wind’s CEO.
Krstajic also touched upon potential exit strategies for his investors as well, with an initial public offering the most desirable outcome – for he and his backers, as well as the Canadian industry as a whole. “Their worst nightmare isn’t that I get an extra one or two points… it is if they fight this battle too hard and we actually fail – and these assets get picked up by Verizon, AT&T or Sprint,” he said.
“Let me grab four or five points, it’s like a Band-Aid, rip it off, and we’ll all do well. We’ll do an IPO and we’ll all be very successful and… they should be happy for us… They should, in the next few years, want us to have the best IPO in Canadian history,” he continued. That way, it would be far less likely that a U.S. player could come in and take them out.
And, Krstajic added he doesn’t want to sell outright to an incumbent. He didn’t do all this work just for one of the big three to buy him out and then see the Canadian market revert back to the time where cool new handsets come out with all three at the same time and price “to the minute and the penny.”
File photo from Canadian Telecom Summit by Michal Tomaszewski / Pinpoint National
