Analysts are indicating now is the time to buy some cheap Canadian wireless stocks, as the mobile phone market finally has rebounded from its 1997 growth slump.
BT Alex.Brown Inc. expects Canada’s mobile phone companies to add a total of 210,000 new subscribers during the second quarter, up 26 percent from the previous year. But stocks still are low as investors have worried over the last several quarters about slow subscriber growth.
“Investors have been worried about how quickly carriers are growing their customer base and how fast revenue would flow,” said George Karidis, telecom analyst with the Yankee Group in Canada.
Consumers no longer are holding off on purchases like they did in the latter part of 1997 as they waited for some of the big players to enter the market. Most of the initial problems that plagued Canada’s digital cellular and personal communications services operators have been solved, and pricing has stabilized, say analysts.
BT Alex.Brown said the lack of growth was attributed to subscriber confusion over changing products, prices and operators, limited brand awareness of new PCS entrants, weak initial coverage and distribution.
Microcell Telecommunications Inc., a Global System for Mobile communications PCS operator that was the first to launch digital service in Canada, introduced service last November without dual-mode handsets. Karidis said the company’s coverage area was too small and its competitors entered the market with better offers.
Microcell led the pack in second-quarter subscriber additions, adding almost 50,000 customers, said Karidis. It began offering dual-mode handsets in January, increased coverage and introduced its Bring a Friend program that allowed customers with single-mode GSM phones to give their old phones to a friend in exchange for a dual-mode handset. The friend would in turn receive one month of service for free. Karidis said the program stimulated growth.
Code Division Multiple Access PCS operators Clearnet Communications Inc. and Bell Mobility also have expanded coverage across Canada and solved their handset distribution problems experienced in the fourth quarter that resulted in dual-mode handset shortages. Clearnet, which launched last October, said it added 35,754 PCS subscribers in the second quarter. Bell Mobility and TDMA operator Rogers Cantel Inc. will announce their subscriber numbers in August.
Rogers Cantel, a nationwide cellular operator, increased growth on the analog side by introducing Canada’s first-ever prepaid service in May across the country. The company signed on more than 10,000 customers in less than a month.
“It addresses a new market segment that hasn’t been able to get a phone. Subscriber growth will be significant,” said Karidis.
BT Alex.Brown said Canadian operators plan to introduce calling party pays service within a year or two. This too should be a driver of revenues, usage and subscribers in Canada, said the firm.
