OTTAWA – The wireless industry realized operating profits exceeding $1 billion for the first time in its history in the third quarter of 2006, says Statistics Canada.
Operating profits reached $1.2 billion in the third quarter of 2006, ended September 30th, up 34.4% from the corresponding period in 2005.
This jump in operating profits resulted from the combined effect of a 16.4% increase in operating revenues and a much smaller increase of 8.8% in operating costs, says this week’s release.
Wireless operating revenues were $3.4 billion and operating costs were $2.2 billion in the third quarter of 2006.
The addition of new customers explains much of the growth. There were 17.6 million wireless subscribers on September 30, 2006, a 10% increase over the same time in 2005.
"These subscribers also made greater use of their equipment and spent more for their services, enabling the industry to show additional revenues. Average revenues per subscriber climbed 5.7% in one year, from $180.60 in the third quarter of 2005 to $190.80 in the third quarter of 2006," says the release, as subscribers continue to explore data applications like music and video.
While the wireless market continued to surge, the conventional wireline telecommunications market kept declining, especially in the residential market, says Statscan.
At the end of the third quarter of 2006, 11.4 million conventional residential lines were connected to the network, down 6.5% from the same date a year earlier. Thus, in one year, the number of conventional residential lines fell by 788,000. Most of this loss was taken up by the major cable operators, which recruited some 740,000 customers for their cable telephony services during this period.
VOIPsters like Vonage, Primus and others likely picked up the rest.
The loss of residential customers continued to pull down the revenues of conventional wireline operators. Those revenues went from $5.6 billion in the third quarter of 2005 to $5.5 billion in the third quarter of 2006, a drop of 1.7%. This is a fundamental trend that began five years ago. Since the start of 2001, quarterly revenues have fallen year-over-year in all quarters except the last two quarters of 2004.
Despite declining revenues, conventional wireline telecommunications operators realized operating profits that were slightly higher in the third quarter of 2006 than in the corresponding period of 2005. Nevertheless, the 17.1 cents of profits generated for every dollar of revenues in this industry segment was scarcely half the figure generated by wireless, says Statscan.
In the first nine months of 2006, capital expenditures by conventional wireline telecommunications operators totaled $3 billion, while those of wireless telecommunications operators totaled $1.2 billion.
In both cases, the value of capital expenditures per dollar of revenues was comparable to the first nine months of the previous year.
