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    Wireless giants take stock hit as fed decisionlures small carriers and newcomers Yak Communications to enter  
    The Canadian Press  
   

 

 
    November 29, 2007  
   

TORONTO - Canada's three wireless giants were pummelled at the Toronto stock market on Thursday after the federal government made a decision a day earlier to open the possibility of greater competition from smaller regional players.
Rogers Communications (TSX:RCI.B), which owns Rogers Wireless, took the biggest
plunge closing down more than eight per cent, or $3.79 to $41.71.
Telus Corp. (TSX:T) lost 4.7 per cent, or $2.29, to $46.62.
BCE Inc. (TSX:BCE), which owns Bell Mobility and is to be taken private by a consortium led by the Ontario Teachers Pension Plan for more than $52 billion next year, dropped just 1.3 per cent or 52 cents to $39.20.


All three companies are facing the increased likelihood that small regional carriers will
significantly beef up their market positions next May when an auction is held for wireless capacity.
Industry Minister Jim Prentice said Wednesday the government has decided that a certain amount of wireless spectrum, or capacity, will be reserved for new or small players and unavailable to the three major carriers.
The move is expected to help increase wireless competition which could bring cellphone users more choice and more competitive pricing.
On Thursday, Yak Communications (Canada) Corp., a relatively small player in Canada's phone industry, said it's preparing to join the bidding process.
The Toronto-based company, which began by selling long-distance phone services and
more recently started an Internet home phone service, is expected to face stiff competition from some of Canada's biggest telecom companies.
Yak, a subsidiary of Globalive Communications Corp., said it intends to become the first"no contracts, no gimmicks" wireless provider in Canada.
The company intends to focus on low-to-middle income households to sell its planned
wireless service, said Anthony Lacavera, chief executive officer of both Yak and Globalive, in an interview with The Canadian Press.
"We're going to be serving the unbanked, or partially banked, population," he said.
"They just can't afford a cell phone today because prices are so high."
Yak plans to join the bidding process for major urban centres across the country.
Lacavera didn't say how much Yak and Globalive plan to commit to the upcoming auction, which will determine how much the winners pay for federal licences to radio frequencies that can be used to carry the wireless signals.
"We can get into business with not a lot of spectrum at all, so what we just want to do is ensure that we're well-differentiated from the other new potential entrants," Lacavera said."We think we've got a very compelling case given how low the penetration levels are in Canada.

A study by consultant firm The SeaBoard Group suggests that only about 58 per cent of
the Canadian popular owns a cell phone, while most other developed countries run closed to a 90 per cent penetration level. Part of the reason is the long list of charges that consumers in other countries often don't face, said Iain Grant, an analyst with SeaBoard. Costs like long distance and roaming fees within the country drive up monthly bills for Canadians, he said. "Some of those additional costs that are uniquely Canadian, while in other countries they're included," Grant said.
He predicts that with increased competition prices will gradually start to drop and more
appealing price bundles and other options with emerge.
"Don't hold your breath, but this time next year I think your wireless bill will be less and
your usage will be up," Grant said.


Analyst Troy Crandall of MacDougall, MacDougall & MacTier said he doesn't expect
consumers will see lower prices from the new players. Crandall said likely new entrants would instead look to bundle wireless with their other services.
"They're already profitable companies and they already have a bundle of services on their own now," he said. "Likely what they'll use is wireless to complement those services and actually probably help sell the other services on their own as well. I'm actually not expecting there to be much discounting, especially if you were only to take one service."
Several other carriers are expected to officially announce plans to join in the May auction, such as MTS Allstream which said it will take the proposal to its investors before making a commitment. Other participants will include Quebecor Inc. (TSX:QBR.B), through its media division - which owns the Videotron cable, Internet and phone business in Quebec. Quebecor president and CEO Pierre Karl Peladeau, who has been pushing for Ottawa to set aside some wireless spectrum for companies that don't have a wireless network, will invest $500 million to build a broadband wireless network in Quebec.

 


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