OTTAWA – The number of Canadians who are abandoning their plain old telephone service for new-fangled cable delivery – or moving to wireless alone – continues to grow, a report from Statistics Canada says today.
There were 16.8 million wireless subscribers at the end of the first quarter, up 11.9% compared to the first quarter of 2005, a rate of year-over-year growth that is comparable to those observed over the past three years.
While the wireless market grows, losses among the traditional wireline players accelerate. The year-over-year drop of 5.3% was the largest observed since the erosion of this market began in 2001, says the report. There were 11.8 million traditional residential lines at the end of the first quarter.
"Most of the customers giving up their traditional residential lines are turning to wireless or cable telephone services," says Statscan.
But despite the growth in wireless here, Canadians’ embrace of the technology isn’t as warm as in other countries. "There were just under 52 subscribers per 100 habitants in Canada at the end of the first quarter, a level reached by the United States in the second half of 2003," says Statscan. "Canada’s lag in this regard is even more evident when compared to other Organization for Economic Co-operation and Development countries, where there was an average of 53.5 subscribers per 100 habitants as long ago as the end of 2001."
According to the most recent data from the Residential Telephone Service Survey, close to 615,000 households were using only cellular services at the end of 2005, approximately 285,000 more than a year earlier.
"Along the same lines, a recent report by the (CRTC) indicated that competitors (excluding wireless services) of the incumbent telephone companies had attracted 963,000 residential clients by the end of 2005, more than double the corresponding figure for the end of 2004, when there were 418,000. The major portion of this leap of 545,000 customers (59%) can be explained by the strong growth of telephone services offered by the major cable companies," says today’s research.
This turbulence in the industry is reflected in the financial performance of its major segments, too.
For the past several quarters there has been a very clear downward trend in the revenues of traditional wireline operators. This trend continued in the first quarter of 2006, when they dropped 3.8% from the first quarter of 2005 to $5.5 billion. The situation was entirely different in the wireless market, where revenues have been steadily increasing. For the first three months of the year, revenues shot up 17.2% over the same period in 2005 to reach $2.9 billion, says Statscan.
In terms of profits, the earnings before interest and taxes of traditional wireline network operators were $1.1 billion in the first quarter, down 10.1% from 2005, while those of wireless network operators rose 32.2% to $854.2 million. The 29.5% profit margin realized by wireless service providers was 10 points higher than those of wireline service providers.
