Canadian wireless firms cruise comfortably along

The new crop of mobile service providers seems to have buoyed the Canadian mobile sector, experts note.

While oil and gas companies – traditional standard bearers – took a beating last year, the telecom sector did relatively well, a survey of the country’s top 1,000 firms indicates.

Telecom companies either held their positions or climbed up the ladder, according to the 26th annual Report on Business Top 1000.

The report ranks Canadian publicly traded companies by the most important metric of all — profit.

“Canadian telecom companies did admirably,” said report author, Brian Milner.

“Using a combination of restructuring and good old oligopoly (which also worked before for banks and the auto industry) they managed to remain on top,” he told ITBusiness.ca.

At least a couple of incumbent wireless providers significantly improved their standings, Milner’s report indicates.

BCE Inc., which was 32nd on the list in 2008, shot to number 10 in 2009. Rogers Communications, which was 31st two years ago was number 15 last year. Telus, maintained its position at 28.

Research in Motion (RIM), makers of the BlackBerry smart phone, zoomed to number four on the list from being number 12 in 2008.

However, on the whole, banks fared the best.

The top five companies listed in the report are: Royal Bank of Canada (#1); Bank of Nova Scotia (#2); Toronto Dominion Bank (#3); RIM (#4); and EnCana Corp. (#5).

“A strong demand for mobile services and technologies enabled incumbent telecoms and RIM to consolidate their positions despite the capital freeze,” said Milner.

Wireless storm?

While the big guys continue to hold onto to their market shares, a new crop of wireless service providers are gearing to wrest customers from them with bare-bones service plans, said Grant Robertson, business reporter for the Globe and Mail.

In his accompanying piece to the Top 1000 report — titled Strings Attached — Robertson deals with the battle for Canada’s wireless market, which has been further animated by the entry of three new players.

“A lot has changed in the wireless landscape this year,” Robertson told ITBusiness.ca. “The new entrants will make a profound impact on the business of the incumbents.”

Last December, Wind Mobile began offering contract-free plans. Mobilicity, based in Vaughan, Ont, launched its network May 14 and Public Mobile followed soon after, launching May 26.

“The local mobile and wireless market is very new and still wide open,” said Krista Napier, senior analyst, competitive intelligence and emerging technology at IDC Canada.

She said the period is ripe for wireless service providers of various hues to enter the space.

Smart phone adoption in the country is nearing 17 per cent and device shipments this year experienced a 22 per cent growth, Napier noted.

Overall, data and voice revenues were pegged at $15 billion in 2009, and are expected to reach $23 billion by 2013.

With better high-speed networks, she said, Canada is well positioned to use more data-intensive apps.

Winning strategies

To wrest a sizable market share from the incumbents, the new entrants would either have to come up with more compelling service offerings, or join forces to scale their coverage, according to Robertson.

At least Tony Lacavera (CEO of Globalive Wireless, which owns the Wind brand), has already been suggesting that new entrants talk to each other, Robertson noted.

He said banding together appears to be a good idea

.

“An Eastern Canada-based company, such as Mobilicity (for instance), could reach more customers by joining forces with Quebec-based Videotron. Wind would be able to gain a larger network if it worked with Shaw Communications.”

For one, Robertson said, this strategy could prevent incumbents from gobbling up the startups.

Another strategy that appears to work for the new entrants is by moving away from restrictive and costly service contracts.

Robertson said the new providers are veering away from cut throat price reductions that tend to gut the market. “I think they understand that it will not help them in the long run.”

“The bad news is I don’t thing consumers are going to see the big price drops they hoped for.”

Rather than offering customers a free phone in exchange for expensive two-year-contracts, the new entrants appear to focus on pay-as-you go plans or low rate talk-and-text plans, he said.

“I think this works out well because many users appear ready to absorb the upfront cost of a handset in exchange for plan they can easily carry,” said Robertson.

Robertson said the battlefield to win over Canadian mobile device users is ready. “It will be interesting to find out who among the new entrants will remain standing in the next five years.”

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