TORONTO – By the end of 2014, new wireless entrants will have captured 4 million or approximately 12% of the Canadian wireless market, up from 5% at year-end 2011, according to a new study from Toronto’s Convergence Consulting.
Part of that is because that the new entrants, not taking into account promotional pricing, can undercut incumbents and their discount brands by more than 58% on combined voice/data pricing, and by more than 83% on data alone, maintains the report Canadian Wireless 2009-2014: Assessing The Impact of New Entrants. But when it comes to voice pricing, incumbents and their discount brands can in some cases match or even undercut certain new entrants. These lower wireless voice prices are spurring wireless substitution, which the report predicts will grow to 26% by the end of 2014, up from 15% at year-end 2011 and 11.5% at the end of 2010.
The outcome of the pending 700 MHz auction, however, combined with Shaw’s wireless entry (the report maintains that Shaw will most probably enter the wireless market), plus the closure and/or sale of some of the independent new wireless entrants, are all critical variables continues the report.
Wireless service ARPU (as a weighted average) is anticipated to drop 1.4% this year, driven by an 11% drop in voice ARPU. This contrasts with the report’s estimate that data ARPU will grow 28% this year. By the end of 2011, smart phone subscribers will represent 39% of the Canadian market, but that will grow to 64% by the end of 2014.
Excluding spectrum expenditure, the report predicts that cable new entrants will on average be EBITDA positive and have positive pre-tax operating free cash flow by the end of their second year of operations, however independent new entrants will not reach this point until the end of their fourth year of operations on average. Positive cumulative pre-tax operating free cash flow on average for cable new entrants is expected by the end of year eight, but not until year eleven on average for independent new entrants.
For more on this report, now in its fourth year of publication, visit www.convergenceonline.com
