OTTAWA – Canada’s telecommunications industry will grow at a modest pace over the next four years, but significant shifts in segments of the market will constraint profitability, according to the Conference Board’s report, entitled Canadian Industrial Outlook: Canada’s Telecommunications Industry – Spring 2008.
“Fierce competitive pressures in growing segments of the telecommunications industry will limit price increases. This increasing competition benefits consumers – but will constrain profit growth for telecommunications companies,” said Michael Burt, associate director of the report.
The number of wired phone lines is steadily declining, but increasing demand for wireless services will sustain overall growth in the industry, states the report.
The May 2008 spectrum auction for wireless services will bring new competitors into the market, which will limit the industry’s ability to raise prices. Prices are forecast to grow at less than 1% annually through 2011, says the report.
In addition to weak pricing power for the industry, rising costs will be another factor limiting profitability. For example, labour shortages in the IT sector are driving wage increases, notes the report.
As a result, after posting double-digit profit growth in each of the past two years, industry profits are expected to grow by just 1.1% in 2008, to $6.8 billion. Profits will remain flat in 2009 and will grow modestly each year between 2010 and 2012, predicts Canadian Industrial Outlook.
