OTTAWA – A three percent loss in the number of traditional residential phone customers served caused an overall 2.2% loss in revenue among incumbent telephone companies in the third quarter of 2005, Statistics Canada reported Monday.
"New technology, competition and changing consumer habits are contributing to the gradual transformation of telecommunication services industries and markets, and this transformation is becoming increasingly evident in the local residential telephony market," says the report.
There were 12.2 million traditional residential telephone lines at the end of the third quarter of 2005, down 3% from the same period in 2004. "This was the largest year-over-year drop since the end of 2001 when the erosion of this market began. The entry of a few cable television companies into the local telephony market largely explains the acceleration of the downward movement in 2005," says the report.
The market for business lines has remained stable compared to the previous year, with just over 7 million lines at the end of the third quarter of 2005. "This confirms the very marked slowdown observed over the past year in the erosion of this market," says Statscan.
The loss of residential customers continued to pull down the operating revenues of traditional wireline networks operators. Those revenues fell to $5.6 billion in the third quarter, down 2.2% from the third quarter of 2004. Operating profits plunged 31.4% to $900 million, compared to $1.3 billion in the previous quarter. This drop was, at least, partly due to non-recurring expenses, including those generated by labour disputes and reorganizations.
"During this time, wireless telecommunications continued to gain steadily in popularity, to the benefit of the industry serving this market," says the report.
Wireless attracted more than 500,000 new customers between June and September of last year, bringing up the total number of wireless subscribers to more than 16 million at the end of the quarter, up 12.4% from the third quarter of 2004. This growth rate is comparable to those observed in the past three years.
These new customers enabled the wireless industry to achieve record revenues and operating profits in the third quarter. Operating revenues climbed to $2.9 billion, up 16% from the third quarter of 2004. Operating profits rose 15.7% to $868.9 million, compared to the same period in 2004. Wireless operators generated almost as much profit during the first nine months of 2005 as they did in the entire previous year. The 30% profit margin posted in the third quarter equalled the highest margin in the industry’s recent history, observed in the same period in 2004.
The main operators of traditional wireline systems invested just over $3 billion in updating their networks over the first nine months of 2005, up 6% compared to the first nine months of 2004. Investment in wireless networks fell nearly 7% during the same period, going from $999 million in 2004 to $930 million in 2005.
