OTTAWA – Even in a weak economic recovery, profits in Canada’s telecommunications have remained strong thanks to cost control and demand for new technologies, says a new report from The Conference Board of Canada.
The report, Canadian Industrial Outlook: Canada’s Telecommunications Industry – Autumn 2010, predicts that industry profits will grow 11.6% to $7.5 billion in 2010, building on a 5.6% increase in 2009.
"The sluggish economic recovery made it harder for telecom providers to attract new clients or convince existing customers to expand their service," said economist and report author, Maxim Armstrong, in a press release. "However, lower costs and continued demand for new products, such as digital TV and smart phones, helped to keep the telecom industry growing when most other industries were in recession."
While slower sales and minimal price increases resulted in sluggish revenue growth over the last two years, costs increased by just 1% last year. Low interest rates and a favourable exchange rate, which lowers the price of imported components, will limit cost growth to 0.9% in 2010.
Looking ahead to 2011, the report says that profit levels could begin to stagnate as increased competition from the four new wireless service providers will limit the ability of incumbent providers, notably in wireless services, to raise prices.
