“Competition Risk” Hits Wireless Industry

by Jordan Richardson on June 29, 2010

According to Jeff Fan from Scotia Capital, the wireless industry is currently subject to “competition risk.” That means that the upstarts are expected to produce more pandemonium than originally thought, creating market commotion as the established companies try everything to protect their bottom lines.

The news came after the first thorough look at wireless competition was released in a report from Scotia Capital. The report states that Canada’s new players are actually taking business away from the Big Three (Rogers, Telus, Bell) instead of attracting new clients altogether.

This creates concerns for some investors, as the solidity of Canada’s telecommunications oligopoly had made it a comparatively steadfast investment opportunity. With the new competition infiltrating the old guard, some investors are shying away from further action.

This also means that the recognized firms will be clinging to their market share with everything they’ve got. Cuts can likely be expected as Rogers, Telus and Bell attempt to safeguard the 96% of the telecom markets they hold.

The Scotia Capital report is telling, to say the least. It says that about two-thirds of subscribers for WIND Mobile and Public Mobile came from customers of the incumbents. This is a higher percentage of customer transfer than first anticipated by most analysts and does lend standing to the notion of peeved Canadian wireless consumers.

It also will have consequences, however, as the incumbents brawl to hold on to their customer bases.

One of the first salvos to retain consumers came from Rogers with the revelation of its Chat.r brand. By associating itself with a discounted discount brand and giving customers an even cheaper edition of its Fido brand, Rogers is continuing to guard its market presence steadily. We can probably expect similar moves from Bell and Telus as they, too, look to seize their customers within their corporate borders.

Competition is springing up nationwide and in motivating forms, too. In Quebec, Vidéotron represents a substantial menace with its discounted services and bundled plans. And in Western Canada, Shaw’s wireless manoeuvre is expected to give Telus something to think about.

In similar situations, price wars erupt and consumers conventionally harvest the benefits of corporate combat. But whether that’s to be expected to happen here remains to be seen.

Instead, it’s more likely that black-masked “discount” brands and greater corporate presence will creep into the markets from the Big Three like the bungled Black Bloc infiltrated the crowd of protestors in Toronto over the weekend. And the results might be just as repulsive to Canadians.

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Written by: Jordan Richardson. www.digitcom.ca >. Follow TheTelecomBlog.com > by: RSS >, Twitter >, Identi.ca >, or Friendfeed >

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