Telecom: Mobile operators take battle to new front

By Jamie Sturgeon | Postmedia Network | Nov. 18, 2010

Far removed from the marketing carpet bombs new and established mobile operators are raining down on one another in cities across the country this fall, another front is opening up — political and regulatory scraps.

The latest salvo in this emerging battle was fired Thursday when startup carrier Mobilicity filed documents with Industry Canada urging the department to endorse laws recently brought on in Quebec and now tabled in Ontario curtailing what the carrier calls “anti-consumer” behaviour from market incumbents Rogers Communications Inc., BCE Inc.’s Bell Canada and Telus Corp.

“Without government legislation, incumbents will continue to avoid competition by employing ... anti-consumer tactics,” Toronto-based Mobilicity wrote in a letter to Industry Minister Tony Clement.

Mobilicity, which launched cellphone and mobile data services in Edmonton, Vancouver and Ottawa this week, alleges multiple transgressions from Rogers, Bell and Telus resulting in higher bills for customers, as well practices designed to unwittingly lock clients into longer contracts that remain costly to terminate.

The firm, which launched in Toronto in May as a low-cost alternative to the big three, said it “encourages the government to explore the introduction of consumer protective legislation similar to that enforced by the province of Quebec or recently introduced in the province of Ontario.”

Dave Dobbin, Mobilicity’s CEO, said the firm is rallying behind a private member’s bill introduced by Liberal backbencher David Orazietti in the provincial legislature this week that aims to reduce cancellation fees as well as make advertising and billing more transparent.

The move follows on the implementation in Quebec of Bill 60, legislation that makes similar demands of carriers in that province.

Mobilicity’s letter is the latest in a series of official complaints from new mobile entrants.

The startups, including Wind Mobile and Public Mobile face considerable in-market challenges against their well-entrenched foes, and are looking for any means of “relief,” Lawrence Surtees, senior analyst at IDC Canada said. “They have a number of frustrations.”

So-called “hard handoffs” of calls, where a signal is dropped once a customer leaves a new entrant’s home zone, is another point of contention made by Wind to regulators at the Canadian Radio-television and Telecommunications Commission.

There are no rules mandating seamless call transitions, and incumbents have used that to advantage by advertising that their larger networks experience fewer dropped calls, which is true. Rogers defended itself in a response to the CRTC dated Nov. 12 that its customers faced the same dilemma.

“Seamless handoff is not the norm for roaming arrangements,” the company said. “When Rogers’ customers pass from Rogers’ network to third party networks, their calls also drop.”

Yet Rogers’ launch of Chatr Wireless (and to a far lesser extent, a response from Bell’s Solo Mobile brand) is drawing the heaviest fire. Rogers introduced Chatr in July to directly vie for customers targeted by Wind, Mobilicity and Public Mobile.

Mobilicity and Wind are now challenging the brand’s legality through the Competition Bureau, a process still underway.

“They are not behaving politely, but no one expected competition to be a polite, gentlemanly sport,” Mr. Surtees said of Rogers and the other incumbents, recalling a quote from Theodore Vail, the U.S. architect of the AT&T phone system a century ago.

“He said competition is strife, it’s warfare and contention to the highest degree that the conscious of the contestants or the laws will allow.”

Financial Post
jasturgeon@nationalpost.com

Quebecor paces acceleration of wireless wars

Jamie Sturgeon | Financial Post | Sept. 6, 2010

TORONTO -- When Vidéotron Ltée chief executive Robert Dépatie confidently beamed this past spring that his Quebecor Inc. telecom division was “on the verge of launching Quebec’s most competitive and complete wireless service,” many believed a splashy launch was imminent.

June gave way to July, then August. It is now September, and Quebecor is ready for take-off, saying in a company release today service will be turned on Thursday.

Start your engines.

As the first of two well-entrenched cable incumbents to bring on wireless services this year and next, Montreal-based Vidéotron’s long-awaited entrance into Quebec’s wireless market represents a significant shift for the industry.

Analysts are taking Mr. Dépatie’s words seriously, and so is the competition. “Long-term, Vidéotron has great potential to make a lot of money out of wireless in Quebec,” Maher Yaghi at Desjardins Securities says.

He and others expect the firm to begin immediately stealing market share from wireless incumbents Toronto-based Rogers Communications Inc., BCE Inc.’s Bell Mobility, also of Montreal, and Vancouver-based Telus Corp. through a strategy built around bundling affordable mobile services into household cable, Internet and phone products Vidéotron already sells to its 1.8 million customers.

The company will offer 30-40% discounts to the incumbent wireless operators’ voice and data pricing in Quebec if customers take wireless as part of a bundle, Dvai Ghose, analyst at Canaccord Genuity said in a note Tuesday.

"[The] aggressive wireless price points ... will force Bell, Rogers and Telus to respond," he said.

Most stock analysts following Quebecor like Vidéotron's chances. Of 13 covering the firm, 10 rate it a “buy” or “sector outperform,” according to Bloomberg. Three, including Mr. Yaghi and analysts at TD Newcrest and Credit Suisse, rank the shares as a “hold.”

Vidéotron cut its teeth in wireless in 2006 when it partnered with Rogers in a resale deal that slapped its branding on phones that ran over the incumbent’s network.

But since paying Industry Canada more than half a billion dollars to secure its own wireless licences in 2008 and constructing a 3G+ network across its wireline territory, the most important growth engine for Vidéotron is now ready for prime time.

Mr. Yaghi conservatively suggests Vidéotron will win 45,000 customers before the end of the year, and will have attracted 165,000 through 2011. Combined with its existing 87,000 wireless clients — equal to about 2% of the Quebec market — Vidéotron will boast a subscriber base of a quarter of a million customers 15 months from now.

With nearly 40% of Quebec’s 4.3 million wireless customers toting a Bell device, it is no surprise the cross-town giant has been aggressively courting Quebeckers with discounts on Internet and TV alongside home-phone. It is part of Bell’s strategy to win the entire “broadband home” away from Vidéotron. Instead of the pesky cableco stealing its wireless business, Bell will take Vidéotron’s Internet and cable accounts, and if it can, reclaim home-phone customers, too.

"You'll see much more product and marketing development towards owning the entire household over the coming period," Kevin Crull, chief of Bell's residential services said in an interview last week.

Irrespective of whoever wins this tug of war, industry-wide disruption is expected.

Pricing has been guarded like a state secret. But there are good odds that Vidéotron will introduce some form of unlimited calling. There are ads floating around Quebec now suggesting customers will no longer have to fret over how many minutes remain on their plan.

If true, it could hold huge ramifications not just for major rival Bell, but the sector. So far, incumbents have steadfastly resisted introducing any unlimited options in their main brands, which consist of hugely profitable users paying high prices for buckets of minutes and data, usually shackled to a contract.

It is a cash cow Vidéotron now threatens to undermine in its bid to win share in Quebec. “If Vidéotron comes out and offers unlimited local calling, that could be a game-changer,” said one analyst who asked not to be named.

“Bell can’t stand still and not offer it,” he said. “And if they do it in Montreal they’ll have a hard time not doing it in Ontario.”

An unlimited offering from Bell in Ontario may provoke a swift response from Rogers, threatening to dent wireless earnings at both firms. With almost 50% share in Ontario, it is Rogers' most important wireless market.

Telus, the No.3 carrier in the country, is the incumbent with the least amount of exposure in Quebec (or Ontario for that matter), meaning it does not face the level of immediate pressure Rogers or Bell do. But with Calgary's Shaw Communications Inc. preparing to integrate wireless services with its household bundles next year, a similar scenario awaits in Western Canada, as well.

Newser: Wireless startups taking share from Rogers, Bell, Telus: report

Jamie Sturgeon | Victoria Times-Colonist | July 28, 2010

TORONTO -- Canada’s new wireless providers are luring subscribers from incumbents Rogers Communications Inc., Bell Canada and Telus Corp., rather than attracting customers who are picking up a cellphone for the first time, according to one of the first detailed looks at the new competition.

The revelation, among other developments, may revive concerns among investors that upstart players will wreak more havoc in the country’s traditionally staid $16-billion mobile market than has been assumed, while the established firms are likely to hit at their own bottom lines to guard market share, analysts say.

“Hide from wireless,” Jeff Fan at Scotia Capital recommended to clients in a note published Monday. “We expect competition risk.”

About three-quarters of all subscribers with Wind Mobile, Mobilicity and Public Mobile have been cherry-picked from the three major incumbents, a report from Scotia Capital says. It is a higher percentage than some thought would prevail, and could contribute to more aggressive efforts to retain customers at Rogers, Bell and Telus, which together currently control about 96% of the wireless market.

One rumour is that Rogers is set to introduce a new discount brand called “Chat.r.”

Rogers’ new brand would be aimed directly at the area in which new entrants are having the most success: low-income, city dwellers and immigrant communities that want cheap, unlimited voice and text services.

Chat.r will launch during the all-important back-to-school season, typically the highest selling period for a carrier alongside Christmas. Unlike Rogers’ current discount brand Fido, the new service will be completely prepaid with no contracts, closely mirroring the most attractive plans offered by the three new entrants, sources said.

Chat.r will stem subscriber losses for Rogers but at a price. The telecom behemoth will take a hit on the average revenue per user (ARPU) it generates per month, which currently stands at $62.02, the highest among Canadian carriers.

Rogers declined to comment on Chat.r.

“We’re always working to innovate and better serve Canadians, but have nothing to announce at this time,” said Odette Coleman, Rogers’ director of communications.

A new launch would have broad implications for the market. Bell and Telus will almost certainly move to match any repricing while new entrants will also react, threatening all with a punishing price war. “Our concern is that it will ignite retaliations,” Mr. Fan said.

After much uncertainty and — unfounded — anxiety last year, the market has mostly dismissed the new-entrant risk through fiscal 2010. Rogers, Bell and Telus have all seen their stocks rally (as much as 20% in Telus’s case) as ARPU has stabilized and performances have rebounded against weak year-ago comparables.

There may be room left in the run-up as solid second-quarter results are expected again at the end of the month. Yet after that, valuations will be hard-pressed to justify such levels, some say.

“We urge incumbent wireless investors not to be complacent,” Dvai Ghose, analyst at Canaccord Genuity said in a note late last week. The analyst also foresees downward price pressure ahead, especially in Eastern Canada.

In Quebec, Vidéotron Ltée. will launch wireless at the end of summer with aggressive discounts, particularly on data plans which could come in 40% cheaper than current incumbent pricing. Vidéotron operates in Montreal and surrounding areas, but a price cut there could prompt restive customers in other areas to barter for the same.

“Rogers and Bell are particularly susceptible as they enjoy industry leading market share in Ontario and Quebec,” Mr. Ghose said.

With the ability to bundle Internet, phone and TV services, Videotron is expected to experience more sustained success in the wireless market than Wind, Mobilicity or Public Mobile. Despite garnering most of their customers from incumbents, new entrants are believed to be tracking below their own estimates and even the more tempered expectations of analysts.

All four firms won licences to operate cellphone businesses at the 2008 wireless spectrum auction. Wind has been rolling out services across Canada since its December launch, while Mobilicity and Public Mobile began operating in Toronto in May.

jasturgeon@nationalpost.com

Earnings preview: Telecoms before the storm

By Jamie Sturgeon | Vancouver Sun | July 25, 2010

With the economy sending mixed signals, markets have been dicey for months. But there have been pockets of calm, and in particular Canada’s telecom sector, which has enjoyed steady gains against the S&P Canadian benchmark index in 2010.

Investors should not be surprised. For years now, wireless profits have fuelled enviable cash flows and solid earnings growth at Rogers Communications Inc., BCE Inc. and Telus Corp. In recent quarters, each firm has diligently spun out more and more cash to stockholders in the form of dividend hikes while Rogers and Bell have been busy buying back shares, making owning one if not all three a must for value seekers.

As Rogers kicks off second-quarter earnings season this week, the good times are expected to continue. “It will be relatively consistent for the big three,” Phillip Huang, analyst at UBS says, echoing the consensus view on Bay Street.

But good times have a history of ending and some, including Mr. Huang, believe the horizon on the sector’s safe-haven status appears fast-approaching.

“I would characterize it as the calm before the storm, especially if you’re looking at the wireless side,” he said.

The reason for the growing pessimism stems from fresh competition from stalwart cable firms now arming themselves with wireless, and cellphone startups that have recently entered market. Both forces threaten to dent the sector’s impressive cash-generating powers in the second half of the year, some say, and beyond.

On Tuesday, Bay Street expects Rogers to report earnings of 67¢ a share on revenues of $3.026-billion. One focus will be on wireless profit margins, which are expected to continue to fatten. Rogers has been the most aggressive of the big three telecoms in marketing smartphones to existing subscribers and new customers. It was the exclusive Canadian provider of the iPhone up until last November, and as more subsidy costs on expensive handsets are made back, margins are expected to rise among those users, which accounted for a third of its eight-million-plus base in the first quarter.

Many expect that higher mobile data revenues will help Rogers sail past Street estimates and adjust its outlook higher.

“Based on stronger wireless margins, we believe RCI will tweak and raise 2010 guidance this quarter,” Jonathan Allen of RBC Capital Markets wrote in July 7 note.

But margin gains reflects slowing growth. Wireless margins are rising because the amount Rogers is spending to subsidize new smartphones is decreasing as fewer new customers are signed up. New competition from the likes of Wind Mobile may be having some effect in core marketssuch as the Greater Toronto Area. But BCE’s Bell Mobility, once the third-place runner in wireless, is likely the greater concern for Rogers.

Bell has been steadily gaining ground since activating its new wireless network last fall, and is again expected to show robust customer additions when it reports on Aug. 5. A marketing barrage led by its sponsorship of the Vancouver Winter Games led to a blockbuster first quarter. Wireless additions are expected to moderate, but Bell may still add as many as 100,000 new subscribers in the spring compared to 90,000 at Rogers.

“Bell will again win market share away from Rogers. New entrants, as well, but to a lesser extent,” Dvai Ghose at Canaccord Genuity said.

The downside is that Bell faces a period of cost pressures as subsidies for iPhones and BlackBerries will be heftier than peers. But Bay Street expects Bell to report profit of 73¢ a share and revenue of $3.78-billon. Another 5% hike to the dividend to $1.83 is almost a lock, following a 7% hike at the end of 2009.

The leveling playing field in wireless between Bell and Rogers also sets the stage for a fierce battle for television subscribers once Bell introduces its new IP television product in Toronto and other markets this year.

As for Telus, the market will be watching whether a very promising start to the year can be maintained when it reports on Aug. 6. RBC’s Mr. Allen called Telus’s first-quarter performance a “turning point” as it recovered from a bruising 2009 which saw wireless revenues per subscriber fall the sharpest among the big firms, and intense competition from Western Canada cable giant Shaw Communications Inc. accelerate home-phone customer losses.

“Telus was arguably the hardest hit by the economy and competition last year,” Mr. Allen said.

But now Telus is hitting back. An aggressive roll out of its rival IP-based television and Internet product bundle, called Optik, is seeing gains against Shaw, and the benefits of cost-cutting efforts have started to pay off. The Street expects the Vancouver-based firm to report 76¢ a share in profit on $2.42-billion revenue and a performance in line with the high end of its full-year guidance.

Telus shares have climbed the highest among the big three this year, appreciating more than 20%, compared to gains of 9% and 13% for Bell and Rogers, respectively.

Average monthly revenues collected per subscriber (ARPU) are also expected show stabilization. Competitive pressures and lower overall usage because of a dismal economy saw voice fees cut last year and data usage fail to make up the difference.

“Declines are going to be much more modest this quarter than what we’ve seen,” Canaccord’s Mr. Ghose said.

Greg MacDonald of National Bank Financial said the quarter will show that wireless data revenues are beginning to buoy and even lift overall ARPU levels at the big three, even as they continue to lower pricing on mobile call charges due to new competition. “I’m looking for flat blended ARPU because of the data growth you’re seeing, despite high single digit erosion on voice,” he said.

Picking a winner among Rogers, Bell and Telus for the quarter can be debated. Investors have flocked to all three this year to take advantage of healthy dividend payouts that are second-best among Canadian stocks as a group (5.5% on average vs. 5.6% among utilities), and have steadily risen.

“All three have done really well,” Juliette John, portfolio manager for Bissett Investment Management’s dividend funds. She manages $750-million, of which 12% is spread across the three telecoms. “They’re considered a bit more conservative and that has become much appreciated I think. And of course that yield is really attractive.”

What cannot be argued is that they all face intensifying competitive pressure going forward, with no consensus on what the impact will be. “If equity markets remain volatile, then a position in telecom for another couple of months may still be attractive,” Mr. Allen said. “But we recommend that investors consider trimming positions as the year progresses.”

Rogers announced at the end of June it would launch “chatr”, and new discount brand to rival offerings from Wind and other upstarts Public Mobile and Mobilicity, which began offering services in key markets in May. Chatr would also preempt a wireless launch from Quebec cable power Videotron Ltee. this summer, and Shaw next year.

The fear is that the move will provoke aggressive responses from Bell and Telus, and perhaps trigger a price war, dragging down profits across the $16-billion sector.

“I’m not so much concerned about the standalone new entrants, even Videotron and Shaw,” UBS’s Mr. Huang said. “The real worry is about what the incumbents do to themselves.”

Canada’s wireless market is maturing and as the race for the last subscribers ensues, margins and revenues may be sacrificed to guard and gain share. Marketing costs are expected to soar in the current quarter.

Some, like Canaccord’s Mr. Ghose say the competition is having a greater effect than is realized. “I believe the new entrants have taken more share than what equity markets think,” he said.

Still, all three have the wherewithal to continue raising dividends and buying back shares. Dips in valuation in the coming months can even provide buying opportunities, Bissett’s Ms. John said.

“New entrants could create hiccups, but that could serve as buying opportunities,” she says, “depending on how aggressive all of the players become.”

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Telecom: BCE chief warns Ottawa to tread carefully on foreign-ownership reforms

By Jamie Sturgeon | National Post - CBC.ca | May 18, 2010

George Cope, chief executive of BCE Inc., cautioned yesterday that government should carefully weigh a decision to change or scrap foreign-ownership restrictions in the telecommunications sector, an area of the economy he says is already flush with investment.

This follows comments last week from Industry Minister Tony Clement further suggesting Ottawa is moving toward a policy shift to promote competition.

At a lunch speech in Toronto, the CEO of the country’s largest communications company said the Canadian market has become highly competitive in the two years since he took over, forcing BCE’s Bell Canada to pump $6-billion into new wireless and wireline upgrades through 2010 to stay ahead.

He pointed to Bell’s new, multibillion-dollar 3G+ wireless network jointly built with rival Telus Corp. as an example of how domestic needs are being met, and warned that allowing in firms from the U.S. and elsewhere may hinder future advancements.

“Do you think Summerside, P.E.I., would come up before Chicago? Not going to happen,” he said. “It happened in this case. So let’s be very, very careful about what we’re trying to solve in Canadian telecom rules because the investment is actually working.”

The network blankets 93% of the country.

Mr. Clement told a special parliamentary committee last week that restrictions could be lifted on the telecom sector by allowing key content assets owned by the biggest providers like Bell and Rogers Communications Inc. to remain in Canadian hands, while opening up distribution and network assets to foreign ownership.

The comments follow a pledge in the Throne Speech in March to liberalize the sector. “Our government will open Canada’s doors further to venture capital and to foreign investment in key sectors, including the satellite and telecommunications industries, giving Canadian firms access to the funds and expertise they need,” Gov. Gen. Michaëlle Jean said at the time.

Ottawa’s move stems from two federal blue-ribbon reports completed in 2006 and 2008, that call for a relaxing of the rules as a way to spur more investment in economically important communications service.

This year however has seen three new entrants into the wireless market, in Wind Mobile, Mobilicity and Public Mobile, with cable giants Videotron Ltee. and Shaw Communications Inc. are on their way with wireless in Quebec and Western Canada.

Competition in broadband is also heating up as Bell and Telus Corp. invest billions this year overlaying copper networks with fibre, bringing alternatives to rival services provided by Rogers and Shaw. “What problems are we trying to solve, what’s the objective?” Mr. Cope said.

Still, the industry, especially in wireless, remains dominated by Bell, Rogers and Telus.

Some analysts suggest that without consolidation or access to more foreign capital (through a change in policy), the young startups face near-certain failure and a retrenchment in services in the market.

jasturgeon@nationalpost.com

Telecom: Shaw making leap ahead in wireless, analysts suggest

By Jamie Sturgeon 04.10.10

Shaw Communications Inc. is embracing the future of the wireless business well ahead of its rivals, but it doesn't mean its acting on it any timesoon.

Calgary's swashbuckling cable and Internet giant has stymied investors and mystified industry analysts for months by keeping tight-lipped about how -- and when -- it planned to use the $189-million worth of airwave licences it picked up from Ottawa nearly two years ago.

Those spectrum licences, which cover more than nine million people across Western Canada, will allow Shaw to round out the so-called "quadruple play" that modern telecommunications firms have moved to offer by enabling Shaw to sell Internet, wireline phone, television and now wireless products.

Analysts say a timely wireless launch is an imperative for Shaw if it wishes to avoid being outflanked by rivals now aggressively going after its traditional TV customers, such as Telus Corp. (which is unrolling its IP-based product rapidly out west).

By building out a modern, data-centric wireless network that can offer appealing devices like the BlackBerry or iPhone, Shaw will be able to bundle services and compete on an even footing.

A timely entrance into the cellphone market would also help stamp out upstart carriers like WIND Mobile, which also acquired airwave licences during the federal government's spectrum auction in mid-2008 and began offering cellphone services in Calgary and Edmonton -- Shaw's backyard -- months ago.

Yesterday, Shaw tipped its hand slightly and revealed when it will launch:In late 2011. Timely was not a word bandied about much on a earnings call with analysts.

"Waiting is actually not a bad thing < its the right thing to do," Michael D'Avella, senior vice-president of planning at Shaw, said.

The delay has analyst suggesting that Shaw is holding off on spending hundreds of millions on a current 3G+ network like the ones operated by Canada's incumbent carriers in Rogers Communications Inc., Telus and BCE Inc., and instead move directly to a fourth-generation technology known as Long-Term Evolution (LTE).

Fuelling the speculation, Mr. D'Avella added: "LTE is going to be a much better technology once its fully deployed. And bear in mind that there will be a very robust ecosystem around LTE and all kinds of devices that have those 4G capabilities."

Carriers the world have begun preparing for the arrival of LTE, a system that will bring ultra high-speed broadband to a person's smartphone. Verizon Wireless in the United States plans to introduce the next-generation network in 25 to 30 cities in that country by the end of the year.

Yet not in Canada. Carriers here, with the exception of Rogers, have just finished pouring colossal sums of money into new 3G+ networks. BCE's Bell Mobility and Telus turned on their HSPA networks in November, while WIND Mobile and Videotron Ltee. in Quebec are still erecting theirs. No domestic carrier is in the mood to spend more on another upgrade any time soon.

Waiting another 18 months or so may prove a shrewd move, but it also carries risks.

Shaw will save itself the expense of playing catchup and give it a first-mover advantage in offering the most data-ready devices on the planet, capable of processing video and multimedia far beyond today's devices.

However, the wait will provide Telus plenty of time to lure those would-be smartphone to its "quad" offering, while handing WIND and by then Mobilicity time to pick off cellphone customers at the margins.

"Wireless penetration is growing everyday in Canada," warned Dvai Ghose at Genuity Capital Markets.

Shaw said it lost 1,055 basic cable subscribers last quarter as profit fell 11% from a year earlier to $139-million (32 cents a share) in the three months ended Feb. 28. However, revenue grew by 11% to $929-million.

Financial Post
jasturgeon@nationalpost.com

Telecom: Rushed launch takes wind out of new wireless carrier

By J. Sturgeon | Vancouver Sun | 03. 10. 10

TORONTO -- Conventional wisdom for Canada’s newest cellphone carriers has been to be first into the market. With fierce competition overhead from established incumbents such as Rogers Communications Inc., the thinking was that the earliest in would hold a key leg up against other newcomers and reap the rewards of consumers’ pent up demand for choice.

Three months after the launch of WIND Mobile, the conventional wisdom is now being undermined by some. “WIND it seems has missed the first-mover advantage,” said Iain Grant, principal analyst at SeaBoard Group, an industry research firm.

Mr. Grant said a hasty launch by WIND has led to spotty network deployment and subsequently weak wireless coverage. Limited distribution channels and advertising have also led to a “lost message” with would-be subscribers.

“Certainly reports of network faults ... and a small retail presence have dampened some consumer enthusiasm for the new entrant’s services,” he said in a new report.

Tony Lacavera, chairman of WIND’s parent Globalive Wireless Management Corp., acknowledged the firm was having some difficulties.

“We can see the weaknesses in the Toronto and Calgary networks and we’re adding sites, adding towers to try and strengthen the coverage. It’s the big operational focus,” he said in a recent interview .

Mr. Grant said other startup carriers such as Mobilicity and Public Mobile would do well to delay their respective launches until their networks are complete and a wide retail presence is secured. Ignoring that could cost customers.

According to Seaboard estimates, WIND has picked up about 30,000 subscribers in Toronto, Calgary and Edmonton, the three cities it now offers services in.

The uptake has not been as brisk as some predicted and indeed likely below WIND’s estimates, which are for 1.5 million subscribers within three years (that would require 41,500 new customers a month).

Analysts say WIND was rushed out of the gate in early December after Industry Minister Tony Clement overturned a ban from the regulator over its controversial ownership and capital structures. Parent Globalive is backed by Egyptian carrier Orascom Telecom, who has provided hundreds of millions in financing in exchange for a 65% economic interest and representation on Globalive’s board.

Mr. Grant said the company likely moved before the decision could be revisited. But things were rushed. Its network was incomplete and only one distribution deal, with Blockbuster, had been signed.

Evidence of unrest at WIND itself -- perhaps emanating from Orascom -- came last week when two senior executives, chief information officer Scott Waller and head of customer service Chris Robbins, pictured, were removed.

Still, others say WIND maintains an upper hand against other wireless newcomers. “The fact that [other entrants] haven’t even launched yet is a testament to the fact that they’ve got a huge competitive advantage because of Orascom,” said an analyst that asked not to be named. Orascom has given Globalive heft in negotiating network and handset agreements that other new entrants lack.

Moreover, new deals with big box electronics retailers Future Shop and Best Buy are rumoured to be in the offing, which would balloon WIND’s distribution.

Meanwhile, neither Mobilicity or Public Mobile, which will compete in major urban centres with WIND, have definitive launch dates.

“No launch is ever going to be perfect,” said the industry analyst. “If you wait for perfection you’ll never launch.”

Financial Post

jasturgeon@nationalpost.com

Telecom: Virgin Mobile boldy moving up market to ward off new threats

By J. Sturgeon | Financial Post | 12.21.2009

Competition will be the watchword for Canada's wireless industry next year, as established players face off against a cast of new entrants poised to steal market share.

While the current operators are talking tough, questioning whether any of the new startups have the right strategy or wherewithal to challenge meaningfully, a shakeup of the entire sector looms.

Nowhere are the crosshairs of the new players trained more closely than on the lower end of the market -- existing cellphone users who merely want inexpensive voice and text-messaging services or Canadians who own no mobile phone because they find current prices prohibitive.

It means the discount or "flanker" brands of Canada's big three wireless firms -- Fido, owned by Rogers Communications Inc., Koodo, owned by Telus Corp., as well as Solo and Virgin Mobile Canada, owned by BCE Inc. -- will face the fiercest competition.

For one of them, the threat is affecting a reinvention, says its president.

"Early next year, we'll be in the first phases of a very different Virgin," said Robert Blumenthal, the head of Virgin Mobile Canada.

What that means is unclear -- Mr. Blumenthal is mum on details. But he did reveal that Virgin will begin selling Apple Inc.'s iPhone.

It is a move, he says, that signifies a transition at Virgin from a discount sibling to BCE's Bell Canada, which fully acquired it this spring, to a full-weight partner, offering a complete suite of services for consumers who are increasingly demanding faster and more sophisticated devices.

"You'll see a great expansion in our portfolio and us being able to offer higher-value devices and services," he said in an interview last week. "Where we had been traditionally lower down in the marketplace, we'll be expanding to realize our true potential."

In the new year, Public Mobile Inc., DAVE Wireless Inc. and Videotron ltee will all launch, joining WIND Mobile, which began offering services last week in Toronto and Calgary. DAVE and Videotron have been quiet on their plans, but Public Mobile has stated repeatedly it will offer cheap, flat-rate voice and text services for perhaps $40 a month across its coverage areas between Windsor, Ont., and southern Quebec -- the most populous region in the country.

Mr. Blumenthal says the threat is overstated, but admits that pricing pressure will be a theme for next year and that Virgin is "considering everything."

One thing is for certain: He wants Virgin to get simple.

As it stands, Virgin offers dozens of prepaid and contract plans, not to mention several "add-on" options. "The easier you can make the decision, the easier to sell, the easier to buy. It helps sales and it helps the consumer make choice," he said.

Virgin Mobile, a subsidiary of the U.K. conglomerate, originally entered Canada four years ago with its celebrity CEO Sir Richard Branson partnering with Bell. The Montreal firm supported Virgin with its network in exchange for shared revenues.

In May, Bell acquired Mr. Branson's half for $143-million while agreeing to continue paying licensing fees. It was then that Mr. Blumenthal, a former Telus executive, joined Virgin.

The division has become a key driver of wireless growth for Bell. Analysts suggest Virgin now occupies as much as 15% of the telecommunication giant's wireless base.

However, if it is to maintain momentum, Mr. Blumenthal says Virgin must leverage Bell's new network upgrade to capture higher-margin smartphone users, which make up the fastest-growing market segment.

"Over time, I have a belief that as more people become wireless users and their wireless usage becomes more of a necessity than a luxury ... people tend to move up."

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Telecom: Wireless startup shut out by regulator

J. Sturgeon | Financial Post | Oct. 1, 2009

Globalive Wireless's bid to become the country's fourth major cellphone provider was stopped dead in its tracks on Thursday after the industry's regulator said the company was controlled by its foreign backer and offside with Canadian telecom law.

The fledging Toronto-based carrier has been preparing for months to shake up Canada's staid wireless market, and was to introduce services in Calgary and Toronto within weeks.

Those plans have been in limbo for the last month as the Canadian Radio-television and Telecommunications Commission has deliberated on whether or not Globalive -- which is almost totally reliant on a Egyptian carrier Orascom Telecom Holdings (OTH) for its financing, technical expertise, even branding -- was in fact Canadian. Domestic ownership is a requirement under the current regulatory framework.

"The Commission considered whether non-Canadians do not own or control Globalive as currently structured. The Commission determined that Globalive does not meet that test," the regulator said.

The decision will surely be seen as shocking to Globealive and its backers, but a relief to the country's big wireless carriers.

Earlier this year, critics led by Rogers Communications Inc., BCE Inc. (Bell Canada) and Telus Corp. attacked Globalive's partnership with Orascom -- a wireless behemoth and the largest provider in the Middle East. They charged that the US$700-million Orascom pledged to the startup combined with its operational involvement handed the foreigner de facto control.

A lot is at stake for the incumbents who pull in hundreds of millions in profits annually selling wireless plans to Canadians that rank among the most expensive in the world. Globalive has vowed to offer cheaper services, presenting itself as the alternative for Canadian subscribers fed up with the established players.

In rare public hearings held last month at the behest of the incumbent carriers, CRTC chairman Konrad von Finckenstein seemed inclined to side with the them, blasting Globalive for tabling a proposal on its ownership structure that virtually split decision-making powers with the Middle East operator. The chairman also criticized certain rights Orascom held in connection with the US$508-million in loans the firm has already extended to Globalive.

In response, the startup carrier agreed to reshuffle and enlarge its Canadian board representation and amend its agreements with Orascom to give Globalive clearer operational control.

The commission ruled on Thursday that the amendments did not go far enough to bring Globalive in line, in part because Orascom, which holds a 65% overall equity interest mostly through non-voting shares, still held too much economic control.

"In circumstances such as the present, where a company is heavily debt financed, this opportunity can translate into significant influence," the CRTC found.

During last month's proceedings, Globalive's chairman Anthony Lacavera (left, photo above) as well as the head of Orascom, Naguib Sawiris, said their original plan did not call for a massive injection of capital solely from the foreign carrier.

However, the financial crisis that turned capital markets into a desert last year -- after Globalive had already committed $442-million to acquire airwave licenses from Ottawa -- required Orascom to extend almost complete start-up financing.

Mr. Lacavera said Globalive planned to pay back the loans or have institutional investors take portions when the firm was beginning to generate cash and could demonstrate its viability.

Yet the commission rebuffed that promise on Thursday, stating it "has no authority to issue a conditional approval on the basis that the carrier undertakes to bring itself into compliance in the future."

In a recent interview with the Financial Post, Mr. Lacavera said he attempted to find other sources of money but was turned down by domestic and international financial institutions. "This was the only way to do it, I believe. We looked inside Canada," he said. "Banks don't lend money easily into companies like this."

Most observers agree that a decision in favour of the would-be cellphone startup would have established a new precedent that undermined Canada's foreign-ownership rules for the telecom sector, which are designed to prevent international giants from overrunning the domestic market.

"The CRTC really had no choice," said Ken Engelhart, senior vice-president of regulatory affairs for Rogers, the country's biggest cellphone provider. "The facts in this case were just so overwhelmingly pointing to control by Orascom. I don't think the commission could have done anything else."

Two other wireless startups, DAVE Wireless and Public Mobile plan to launch within months after acquiring licenses of their own, but both lack the backing of a global wireless heavyweight.

The CRTC ruling flies in the face of an approval from Industry Canada in March that determined Globalive was Canadian-owned and controlled.

For its part, Globalive, which has hired more than 500 employees since last year and is rolling out its network now, said on Thursday it was determining its course of action, which could include returning to the commission with another proposal.

The decision must also come as a personal shock to Mr. Lacavera.

"I'm very confident we'll get a favourable ruling. We've fully cooperated and fully complied with all their concerns and made all the changes they've raised," he said last week.

"For us, it's about getting into the market."

Financial Post

jasturgeon@nationalpost.com