WIND Mobile leads the charge of new entrants in Canada

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Several of the new Canadian mobile operators that acquired spectrum in the country’s 2008 auctions switched on their first mobile networks in the first half of the year and have reported early subscriber numbers. According to the latest Wireless Intelligence research, new market entrants WIND Mobile (Globalive), Public Mobile and Mobilicity have all launched services using the new spectrum so far this year, while Quebecor’s Videotron subsidiary and cable firm Shaw Communications are scheduled to launch soon. While the new players have yet to report significant customer numbers, Canada’s three incumbent operators – Rogers, Bell Mobility and Telus – are already developing counter strategies in response to the new competition.

The most significant new player is WIND Mobile, backed by Egypt’s Orascom Telecom, which holds spectrum covering every part of the country with the exception of Quebec. WIND switched on its first services in Toronto in December 2009, and has subsequently launched in Calgary, Edmonton, Ottawa and Vancouver. The operator is expected to publish subscriber numbers on 12 August and – following some bullish recent comments from its chairman – it is thought that WIND will have hit the 100,000 connections mark by early July. This would give the new operator almost a 0.5 percent share of the total Canadian mobile market, according to our data (see table). WIND is targeting 1.5 million subscribers within three years from launch with a long-term target of 3.5 million.

The 100,000 milestone would be an encouraging sign for an operator that has had a difficult gestation period. Prior to launch, its ownership structure was investigated over concerns that Orascom’s involvement broke Canadian foreign ownership law, while a local research firm (SeaBoard Group) subsequently criticised WIND’s “premature” launch, citing network faults and a poor selection of devices. Nevertheless, WIND remains the most potent new challenger by virtue of its near-nationwide coverage, and the operator has not ruled out a move to acquire smaller players in order to bolster its position. Its basic price plans start at CAD15 per month for inclusive on-net calls, rising to CAD45 per month for a nationwide service. It is also offering a CAD150 credit for customers churning from rival networks for a limited time.

Among the other new players, Mobilicity (DAVE Wireless) launched services in Toronto in May and is planning to launch in several other cities by year-end (it has licenses in 10 of the country’s 13 largest markets); the operator has outsourced the running of its WCDMA-based network to Ericsson. Public Mobile – the only new player using CDMA – has launched in Toronto and Montreal and has licenses covering southern Ontario and Quebec. Both Mobilicity and Public Mobile have around 3,000 mobile customers to date. Meanwhile, Videotron is set to launch services in its home market of Quebec this summer, while Shaw Communications has announced ambitious plans to launch LTE-based services towards the end of next year.

In most cases the new entrants have concentrated on undercutting the incumbent operators with cheap, often unlimited, voice plans. This prompted an immediate counter move by market-leader Rogers Wireless, which in June launched a new sub-brand called ‘chatr Wireless’ offering unlimited talk and texting across its nationwide footprint. Rogers described the new service as part of its multi-brand approach aimed at targeting both the low- and high-end market segments. However, chatr provoked an angry response at Mobilicity, which accused Rogers of abusing its market power by using the service to target Mobilicity’s own customer base. 

Meanwhile, Rogers’ two main national competitors – Bell Mobility and Telus – have continued their own assault on the market leader. The CDMA-based operators joined forces last year to jointly build a new HSPA network, which has allowed them both to offer high-profile WCDMA-based devices such as Apple’s iPhone for the first time. Telus announced this week it now testing dual-carrier HSPA+, which will eventually lift theoretical peak speeds on the network to 42Mb/s. Both operators have also committed to LTE rollout.

According to our research, there are also a number of other regional operators in Canada that have significant market shares in their local markets. Foremost among these are quad-play operators such as Saskatchewan’s Sasktel and Manitoba’s MTS Wireless – which have around 500,000 mobile customers each – and ICE Wireless, a GSM operator servicing Canada’s remote Northern regions.

Will Croft, Analyst, Wireless Intelligence:

For the new entrants, initial performance and subsequent investment will be scrutinised in light of their heavy capex outlays, particularly given recent tactics to boost an initial lacklustre uptake. WIND in particular has seen a significant increase in customer growth in the second quarter of the year, but at a cost of heavily subsidising customer credit and half-price unlimited tariffs for six months, which will prove unsustainable over the long-term, hitting profit margins. With crucial backing from the ever-energetic Orascom, however, the company is well placed to weather any initial hit in building a dependable brand. Meanwhile, incumbent Rogers is being attacked on two fronts. At the low-end of the market, Rogers is naturally the main target for the new WCDMA competition created by the newly-awarded spectrum, and is using new brands such as ‘chatr’ – and the recent acquisition of MVNO Cityfone – to match WIND and Mobilicity’s unlimited tariffs with the key advantage of existing coverage. It also faces trouble at the high-end from its national CDMA rivals, which are now able to offer the most desirable WCDMA/HSPA devices such as the Apple iPhone 4 and iPad, HTC Legend and Samsung Galaxy. This could potentially give Bell and Telus an advantage by sustaining device availability and ramping up network coverage and speed (Telus recently becoming the first to announce a jump to 42Mb/s speeds in 2011), while Rogers struggles to upgrade a larger, and older, footprint. The prospect of further regulatory intervention affecting operators’ triple- and quad-play bundles (and pressure from Bell’s foray into cable services) will continue to disrupt the Canadian mobile market moving forward.

Canada mobile connections, Q2 2010
Source: Company data, Wireless Intelligence