Canada’s Cellphone Market about to see Price War

| July 16, 2010 | 1 Reply

Rogers Communications Inc.’s move to launch a discount wireless brand this summer threatens to ignite an all-out price war between incumbent carriers and a corps of new entrants, one chief executive is warning.

“If Rogers makes the mistake of coming in with a brand and price that undercuts us … they’ll start a price war,” said Alek Krstajic, CEO of Public Mobile Inc., in an interview Monday. “We will not be undersold, full stop.”

Rogers, the largest cellphone and smartphone provider in the country, announced last week plans to launch “chatr,” a low-cost wireless brand aimed at so-called talk-and-text users, or customers that want cheap phone and messaging services with no contract.

It is a section of Canada’s $16-billion wireless market that Rogers has not aggressively courted until now and an area where new providers Public Mobile, Wind Mobile and Mobilicity have had some success in.

Analysts estimate chatr’s new pricing will be in the same $40-to-$50-a-month range that the newcomers charge, while Rogers will offer a bigger home calling zone and other enticements like long-distance deals. If Rogers, which has not released details, pursues the strategy, Public Mobile will hit back will cheaper plans, Mr. Krstajic said.

Public Mobile charges a $40 flat rate for unlimited voice and text but has a “long, long runway” on its ability to lower prices and remain profitable, the executive said. The new carrier paid a modest $52-million for spectrum that blankets the Windsor-Quebec City corridor and just announced a $350-million vendor-financing deal with Chinese network maker ZTE Corp.

A new, low-cost service from Rogers will also not go uncontested from chief rivals Bell Canada and Telus Corp., in what could result in a bruising race to the bottom across the industry, analysts suggest.

The pair of rival incumbents would not likely introduce lower prices in their main or discount brands and risk a crush of existing customers demanding lower prices. Instead, Bell and Telus may respond with new brands of their own.

“We believe BCE (Bell Canada) and Telus will likely match the tactic,” Jeff Fan at Scotia Capital said. In turn, “the other new entrants may also respond to ensure they continue to add subscribers.”

Yet the spectre of a price war for simple voice and messaging services is perhaps just the start of a bigger battle among providers for data-heavy smartphone users, which generate far more revenue than voice-and-text subscribers.

Later this summer or early fall, Quebecor Media Inc. will launch its own mobile service in Quebec through cable subsidiary Vidéotron Ltée. Analysts expect Videotron to take aim at core customers of incumbents by undercutting their data prices by as much as 40%.

The move would put pressure most urgently on main regional competitor Bell, which is set to see its battle with Vidéotron for TV, Internet and home-phone customers ratchet up. However, Rogers and Telus will also face pressure to lower rates if they want to retain customers in the province.

The Quebec cable provider’s launch and subsequent impact on the market will be repeated in Western Canada when Shaw Communications Inc. launches wireless next year.

“This is the beginning of a long, entrenched battle,” Brahm Eiley, principal at Convergence Consulting Group Ltd. said. His firm has forecast average monthly revenue per subscriber to fall by 12% by 2014 across the industry, to $51.

Rogers may launch chatr as early as this month in order to sap whatever marketing power Public Mobile and other new entrants will bring to bear during the all-important back-to-school season, analysts say.

Category: Android Carrier News, Android News Canada

About Chris Yackulic ()

I am a Canadian transplanted to Los Angeles , California and the Founder and Owner of Androidheadlines.com My work history has always been in the computer related field or as a entrepreneur. Became a Android enthusiast since the birth of the first Google phone the G1 and never looked back.My hobbies and interests consist of the learning about new technologies, smartphones, tablets, computers, business, current events, hockey, reading. My favorite android products are the Google Nexus line but am always constantly changing up my devices every 6 months.