Not all new wireless players expected to survive

MONTREAL — New wireless companies are offering consumers lower prices for talking and streaming video on their cellphones but the marketplace won’t be able to support them all, says an industry study.

MONTREAL — New wireless companies are offering consumers lower prices for talking and streaming video on their cellphones but the marketplace won’t be able to support them all, says an industry study.

Companies like Wind Mobile, Mobilicity and Public Mobile are expected to take 10 years to become profitable, the Convergence Consulting Group said Monday.

“We don’t think this market can support three independent wireless new entrants,” said Brahm Eiley, the group’s founder.

“At least one of them is going to have to go out of the market or be acquired,” he said from Toronto.

The three new wireless companies and Quebecor’s Videotron mobile services in Quebec (TSX:QBR.B) are now competing with established players Rogers (TSX:RCI.B), Bell (TSX:BCE) and Telus (TSX:T).

Rogers launched discount Chatr this summer and Bell has repositioned its Solo brand to attract subscribers in the talk-and-text market.

For consumers, there’s now more choice than there has been in almost a decade since the last wave of consolidation in the wireless industry.

“These prices are much lower than what we were seeing a year ago,” Eiley said of voice and data prices. “That’s a really big change.”

The report said the new wireless companies’ combined prices on voice and data have undercut Rogers, Bell and Telus and their discount brands by more than half, or up to 75 per cent when just comparing data.

Data services include sending email, watching video and listening to music.

The new players are offering “some really radical discounts” on data services and that’s where the growth is in this market, Eiley added.

But to keep gaining subscribers, the new players have to keep their prices low.

“They’re going to bleed a lot on the way to taking a lot of subscribers,” Eiley said.

Convergence Consulting projects that Wind Mobile, Mobilicity, Public Mobile and others will have six million subscribers, or 18.6 per cent, of Canadian wireless subscribers by the end of 2014.

Wind Mobile and Mobilicity can’t be acquired before 2014 due to the radio spectrum they purchased that was set aside for new wireless entrants in a federal auction in 2008. Public Mobile isn’t subject to the same conditions because it purchased different spectrum.

The Convergence Consulting report forecasts that average revenue per user at Canadian wireless services will decline by one per cent this year, following a three per cent decline in 2009.

The decline is mainly due to lower revenue per user from voice services, which are projected to drop by seven per cent this year, following a nine per cent decline last year as the new entrants began to enter the market, the report says.

The Convergence Group estimated that smartphone and data device subscribers will represent 31 per cent of the Canadian market by the end of this year.

“By year-end 2014, we forecast Alberta, B.C. and Quebec will see the most market impact from new entrants,” the report said.

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