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    Is there anything it can't do?  
    Globe and Mail  
   

CATHERINE MCLEAN

 
    January 5, 2008  
   

Let others be the mad scientists of the wireless world, endlessly tinkering in their labs to create cooler, faster cellphones. Canadian wireless carriers are comfortable concentrating on another mission: making money.

It's an area of strength for them, highlighted by surging revenue and profits in recent years. Part of it has to do with the addition of more cellphone subscribers. Higher prices for roaming and system access fees, along with increased demand for costly data services have also played a role in ringing up increased sales.

In 2006, wireless revenue climbed 15.2 per cent to $12.7-billion (Canadian). That's a 79-per-cent increase over five years, according to Canada's telecommunications regulator.

Even more impressive is the jump in profitability. Earnings before interest, tax, depreciation and amortization (EBITDA) more than doubled to $5.6-billion in 2006 from $2.2-billion in 2002. In turn, the EBITDA margin soared to 44 per cent from 31 per cent.

This gold mine is shared between just three carriers: Bell Canada, Rogers Communications Inc., and Telus Corp.

"You had a nice, comfortable oligopoly ..." said Gavin Graham, chief investment officer at Guardian Group of Funds, which holds shares in Telus, Rogers and Bell's parent BCE.

While investors such as Mr. Graham have had a great time, he's not alone in believing the cellphone market has become cozy. Unlike other countries, foreign companies can't control Canadian wireless airwaves and networks, so big carriers from abroad have stayed away. Smaller domestic wireless carriers, meanwhile, have been swallowed up by the larger companies.

The three Canadian carriers say they've paid their dues. They spent $20-billion plus building their wireless networks over two decades and argue they are merely recouping the investment.

Iain Grant of SeaBoard Group, which recently issued a report showing that Canadians pay far higher rates for wireless data services than their counterparts in Europe and the United States, said the cellphone industry here does go through innovative periods although that hasn't been the case recently. "The most innovative ideas are now data-centric and the high price of data transmission in Canada doesn't support an experimental culture," Mr. Grant wrote in an e-mail.

Their money-making talents could soon be put to the test. At the end of November, Ottawa decided to set aside some wireless airwaves for new entrants to bid on in an auction this year. It also promised the newbies other breaks, such as the ability to use the bigger carriers' networks.

If fresh competitors do move into the market, the existing carriers will have to learn to share the industry's revenue. They may also face more pressure to embrace their inner inventor instead of seeking inspiration from abroad.

"We are looking for greater competition in the market and further innovation in the industry," Industry Minister Jim Prentice said in a November statement.

 


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