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."

-30-

Telecom: Bell poised to begin offering iPhone

By J. Sturgeon | Financial Post | 10.05. 2009

Bell Canada has cleared the way to begin offering the vaunted iPhone, announcing yesterday it has completed a long-awaited overhaul of its wireless network that will enable the carrier to support perhaps the most iconic handset in the history of the cellphone and smash the de facto exclusivity chief rival Rogers Communications Inc. has held over the device.

For years, both BCE Inc.' s Bell Canada and Telus Corp., the nation's second-and third-largest cellphone companies, respectively, have trailed Rogers, largely because of network superiority. Since its acquisition of Microcell in 2004, Rogers has used next-generation gear called high-speed packet access (HSPA), while the other two relied on CDMA, or code-division multiple access.

A primary advantage of HSPA is the favour it has gained with handset makers as it has overtaken CDMA technology with cellphone carriers around the globe.

Among the HSPA users is Cupertino, Calif.-based Apple Inc., which designed its smash-hit iPhone expressly for HSPA networks.

Having the the only compatible network in Canada, Rogers has been able to offer the iPhone while Bell and Telus watched from the sidelines.

That competitive handicap was dissolved yesterday as Bell announced it has completed a year-long transition to HSPA and will introduce service next month. "The new network will be ready to roll in November, quickly notching up competition and wireless choice for consumers and businesses across the country," said George Cope, chief executive of Bell.

In an interview, Wade Oosterman, president of Bell Mobility would not confirm whether Bell and Apple were in talks to bring the iPhone to Bell in light of the move, but said he anticipated making a new handset announcement soon. Sources suggested both Bell and Telus, which declined to comment on when it would introduce its HSPA upgrade, were close to securing a deal with Apple.

Bell's move, made months ahead of schedule, comes as Bell, Telus and Rogers brace for the arrival of new entrants analysts predict will steal market share from all three.

Three new players in Globalive Wireless, Public Mobile and DAVE Wireless are expected to launch services in major markets this year or early next year. Globalive, which is undergoing a review of its ownership structure by Canadian regulators, has vowed to launch in Toronto and Calgary before the year is out.

"[With] the coming arrival of new wireless brands and networks, Bell will be ready to compete," the Montreal-based company said.

The iPhone, like other smart-phones such as the BlackBerry, nets higher monthly revenue per user on average versus traditional cellphones that do not offer the same level of Web services and cannot be charged higher data fees, although analysts aren't sold yet on whether the hefty upfront subsidies carriers pay for the iPhone are worth it for them.

Both Bell and Telus announced last fall they had begun pouring millions into the network transition ahead of the 201 0 Olympic Games in Vancouver, which will see tourists from around the world converge on B.C., netting the companies lucrative revenues from international roaming fees.

Bell also recently announced an agreement with U.S. giant AT&T that will lock up roaming payments from U.S. customers travelling within Canada.

The earlier rollout will see Bell widen its handset offering for the holiday season as all three incumbents face pressure to capture as many customers as they can ahead of the market shakeup.

The move, which overlays HSPA gear on Bell's existing network, also means Bell can offer devices for both network standards. Bell is already the exclusive carrier of the Pre. Made by Palm, the CDMA-only handset is considered a chief rival to the iPhone.