According to the Convergence Consulting Group, Canada’s new wireless entrants will take a decade to become profitable. The costs of surviving in the telecommunications sector, says an industry study by the group, could drive at least one of the new companies out of business.
The problem, says Convergence Consulting Group founder Brahm Eiley, is that the market can’t support all of the new competition. “At least one of them is going to have to go out of the market or be acquired,” Eiley said.
This, of course, is nothing new to us.
The new companies – namely WIND Mobile, Public Mobile and Mobilicity – are fighting tooth and nail with established Canadian giants like Telus, Bell and Rogers. Lining up against the usual suspects hasn’t been an easy task, especially with Rogers and Bell reconfiguring and establishing discount brands to settle the score with low, low prices.
That competition strategy has meant that the new entrants have had to lower prices drastically to stay in the game and that’s something that simply won’t do over the long haul.
According to Convergence Consulting Group, the combined prices of the new providers have undercut Rogers and the other established brands, including the new discount brands set up by the established brands, by more than 50%. Those numbers climb to 75% when data comparisons are made. This accounts for the market growth, with these so-called “radical discounts” achieving, at least for now, their stated goals of drawing in new consumers.
The problem is that the low prices have to remain in play in order for the new entrants to keep luring subscribers. And, according to Eiley, “They’re going to bleed a lot on the way to taking a lot of subscribers.”
It becomes a game of endurance, then, with companies bleeding themselves dry on their way to a projected 18.6% market share by 2014. Of course, Convergence Consulting Group’s projections include the forecast of continued decline in average revenue for Canada’s wireless companies. It becomes about who can weather the storm and that, by extension, becomes about who has the deepest pockets.
With Quebec’s Videotron having recently launched services and Shaw Communications on its way to doing the same out West, the market will become even more crowded and the survival game will be even tougher for Canada’s new wireless entrants.
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Written by: Jordan Richardson. www.digitcom.ca >. Follow TheTelecomBlog.com > by: RSS >, Twitter >, Identi.ca >, or Friendfeed >
