There could be a significant jump in prices as wireless carriers try to maximize their profit margins and exploit data revenue potential. According to a Convergence Consulting Group report entitled “Canadian Wireless: Assessing The Impact of New Entrants,” more Canadians will sign up for data packages over the approaching years and more companies will try to increase profits as a result.
55 percent of Canadian wireless users will be using smartphones by the end of 2012, which is double the number from two years ago. By 2013, 65 percent of Canadians will be on smartphones.
With this growth in the smartphone sector, it’s interesting to note that the industry’s average revenue per user (the amount of monthly bills, roughly) has been declining since 2009 thanks in large part to the arrival and relative success of new entrants like WIND Mobile.
According to the Convergence report, revenues dipped three percent in 2009 and two percent in 2010. In 2011, revenue dipped one percent. It stands to reason that revenue should be flat in 2012 and will start to increase for carriers by about 0.3 percent in 2014 – at least.
When one considers the fact that the new entrants and the “flanker brands” of some of the incumbents have boosted their bottom-end pricing plans earlier this year, the revenue growth crystallizes. BCE Inc. stopped accepting new subscribers for Solo, its discount brand, and Telus boosted the price of Koodo services while ditching Clearnet.
The new entrants initially made considerable gains by undercutting the incumbents. According to the report, the newbies undercut the Big Three more than 80 percent lower on data alone. Market share is expected to grow for the likes of WIND and Public Mobile, with estimates of 10.3 percent of the market going to “new” companies in 2014, but the pricing models will inevitably evolve.
And when pricing does go up, there will be more incentives to enter into more powerful unions. The report predicts that Shaw Communications could step back into the game, for instance, while some of the new companies may consider consolidation to make their mark on the higher potential for profits.