Canadian mobile phone operators are hoping the holiday season will help them rebound from lagging subscriber additions and falling stock prices.
“The third quarter was a weak quarter in terms of subscriber additions” for the Canadian mobile phone market, said Colette Fleming, vice president of telecommunications with Morgan Stanley & Co. in New York. “This is just a postponement of growth. We see the market expanding for a number of competitors in the fourth quarter.”
Analysts and carriers say the slow third quarter was a result of consumers holding off on purchases until all digital competitors entered the market. Clearnet Communications Inc. and Bell Mobility both launched Code Division Multiple Access service at 1.9 GHz in key cities using dual-band handsets in mid-October. Bell Mobility is the largest member company of BCE Mobile Communications Inc., or Mobility Canada, a national corporation owned and operated by the 15 wireless affiliates of the provincial telephone companies.
“There was a purchase deferral despite a lot of media coverage about the benefits of PCS,” said Robert McFarlane, chief financial officer of Clearnet. “Particularly, Bell Mobility had not launched its service. Bell Mobility has a traditional 60-percent market share and hadn’t thrown in its marketing muscle. A lot of people were holding back.”
But despite the explanations and positive projections for the fourth quarter from operators and analysts, investors are concerned about the slow growth. Since mid-October, all four carriers have seen their stock prices fall at a steady rate.
“The investment community has seen so much change take place with new competitors,” said McFarlane. “Clearly it’s a very competitive market, which we’ve expected, but it makes it difficult for the investor without any data points. They don’t know what the numbers are and are kind of waiting to see the lay of the land … Between mid to late January, all of us will make (fourth-quarter) releases. I generally expect positive results.”
Data about subscriber figures so far haven’t been positive. Microcell Telecommunications Inc., the first to launch digital service, rolled out its Global System for Mobile communications service at 1.9 GHz last year in November. Its subscribers only number around 30,000.
While Microcell’s pricing plans have been competitive, “there was no ubiquity, customers couldn’t roam and the network wasn’t as big as it should have been,” said George Karidis, analyst with the Yankee Group in Canada. “Microcell launched without a dual-mode phone, and it allowed others to revamp their plans and come out with competitive offers.” Microcell will offer a dual-mode handset in January.
Rogers Cantel Mobile Communications Inc., a nationwide cellular operator that also owns 10 megahertz of 1.9 GHz spectrum, launched Time Division Multiple Access technology at 800 MHz last year, co-branding with AT&T Wireless Services Inc. and using the brand Digital PCS. In November, the company announced poor financial results for the third quarter, blaming its lower revenue and income on increased competition and flat demand for wireless service.
“Everything has backed off. [BCE Mobile] lost 30-percent share value. Cantel lost half. You would think the incumbents would have a revenue stream and shouldn’t be affected, but they lost as much as the new players. The stock market apple has lost about 15 percent in the last month. I think it’s reacting to competition … The same is true in the long-distance market. There was a huge fanfare when they went public. Stocks went up and then hit rock-bottom. They have gone up again. I expect similar trends for the wireless market,” said Karidis.
On Dec. 22, Microcell’s stock was trading on the Montreal Stock Exchange in the $9-$10 range, a drop from the $15.80 at which the company priced its stock when it made its initial public offering Oct. 15. Rogers was lingering in the $13 range, after trading steadily in the high $20s throughout most of the year. Clearnet’s stock, which has fluctuated most of the year, was trading in the $15 range, falling from $23.90 on Oct. 15. BCE Mobile, which had traded in the $40 range the first half of the year and the $50 range in August and September, was trading in the $35 range Dec. 19.
Michael Sone, analyst with NBI-Michael Sone Associates in Toronto, expects wireless penetration in Canada to reach 14 percent by the end of the year. It was 11 percent last year. All four operators’ pricing schemes are comparable to what U.S. carriers are offering.
