OTTAWA – Increasing competition and higher costs will limit profitability for Canada’s telecommunications companies this year, says a new report by the Conference Board of Canada.
According to Canadian Industrial Outlook: Canada’s Telecommunications Industry – Spring 2011, telecom providers managed to post profit growth of 10.3% in 2010, thanks in large part to lower costs. But with costs on the rise again, it predicts that pre-tax profits will dip by 9.5% to $6.7 billion in 2011.
Costs will continue to grow, led by above-average wage increases and higher interest rates, averaging 4% per year between 2011 and 2015, while at the same time, sales in the wired sector will remain weak and competitive pressures will allow for minimal price increases, the report continues. The end result will be slightly lower margins and stagnating profits over the next four years.
"Consumers are rapidly adopting new technologies, translating into strong demand for wireless and Internet services," said economist Maxim Armstrong, in the report’s press release. "However, the industry will struggle to keep cost increases in line with revenue growth. Established providers are investing large sums in faster, new networks, but new players in the Canadian wireless market are limiting price increases."
