OTTAWA – Higher costs will limit profit growth in Canada’s telecommunication industry to 3.2%, or just over $6 billion, in 2007, according to the Conference Board’s autumn 2007 report, “Canadian Industrial Outlook: Canada’s Telecommunications Industry.”
The report predicts telecom profits will grow at a modest pace to reach $6.3 billion by 2011.
“Even though the telecom services sector has been plagued by weak pricing and sales growth, profits have improved steadily thanks to weak appreciation in material costs,” said principal economist Michael Burt. “However, with cost growth expected to accelerate, profit growth will be sluggish for the rest of the forecast period. Industry costs are expected to increase by 5.4% in 2007 and will rise by an average of 3.6% for the next four years.”
As well regulatory changes, such as deregulation of local voice services, have been affecting the telecom industry. As well, the report notes that the government auction for new wireless spectrum licences planned for 2008 could increase the number of wireless service providers in early 2008 and result in even lower prices.
The report assumes business will continue as usual after the spectrum auction.
