TORONTO—Wireless companies are duking it out and Canadians are walking away with the prize money, but how low can prices go before these businesses stop making dollars and sense.
Upstarts have been entering the market since last December, introducing deals the Big Three (Telus, Bell, and Rogers) are being forced to match, driving plan prices down across the country and sparking the birth of entirely new brands. The falling prices are a welcome relief to Canadian consumers once forced to pay some of the highest cell phone rates in the world.
“It is a new era of wireless in Canada, we haven’t seen this level of competition ever,” said Amit Kaminer, a research analyst with telecommunications consulting firm The Seaboard Group.
Upstarts have been entering the market since last December, introducing deals the Big Three (Telus, Bell, and Rogers) are being forced to match, driving plan prices down across the country and sparking the birth of entirely new brands. The falling prices are a welcome relief to Canadian consumers once forced to pay some of the highest cell phone rates in the world.
“It is a new era of wireless in Canada, we haven’t seen this level of competition ever,” said Amit Kaminer, a research analyst with telecommunications consulting firm The Seaboard Group.
“Everyone is testing the water. The new entrants are trying to see what market share they can grab for a specific number of dollars and the incumbents are looking to see how much they have to discount from their value propositions to maintain that market share.”
Roger’s stirred up a storm last week when it offered Chatr in select cities, a third wireless brand positioned below Rogers and Fido that offers unlimited talk and text across Canada for $45 a month.
Mobilicity CEO John Bitove has been telling reporters those are the same markets in which his new company is operating, and that Chatr is nothing more than a fighter brand designed to drive the new entrants out of the market.
He has said Mobilicity will file a complaint at Canada’s Competition Bureau under Competition Act laws that prohibit dominant players from introducing temporary brands designed to destroy competitors, although a spokesperson for the company could not confirm Wednesday whether the complaint had been filed. A spokesperson at the Competition Bureau also declined comment, citing legal restrictions.
Telus and Bell Mobility are widely expected to cut prices to their discount brands Koodo and Solo in the weeks before school to compete against Chatr and the new entrants.
Despite the fierce competition, executives at Public Mobile and Wind both sounded upbeat about their prospects in tougher market.
Public Mobile has built its entire business around serving a demographic the Big Three has historically ignored and they won’t be underpriced, said executives.
CEO Alek Krstajic said Chatr legitimizes the market segment that Public is going for. Now that Rogers has dropped prices so dramatically with Chatr, he said Rogers will have to explain why some of their customers get better deals than others.
“Public Mobile encourages all Rogers’ customers to call Rogers and ask for the Chatr pricing,” said Krstajic in an emailed statement.
Rogers may also have to deal with losing customers to its own businesses as subscribers unlock their Rogers phones to use on Chatr, he said.
Bruce Kirby, Public’s VP of strategy and business development, said Rogers can’t go head to head with public on a price point basis because Public has geared its entire company structure to shave costs and secure its value brand status.
“We can make money at price points nobody else can,” he said. “We’ve consistently said we won’t be undercut by somebody else in the market.”
Public is offering service in Toronto and Montreal but plans to extend their network from Windsor, Ontario to Quebec City.
Kirby said by introducing Chatr, Rogers is “just making plain to their customers how much they have been gauging them.”
Wind Mobile chairman Anthony Lacavera also brushed Chatr off, saying business was going well and he sees no need for Wind to change course in response to the competition. That said, he did hint at back-to-school surprises in the coming weeks.
Wind is the most nationally oriented of the new entrants and has just reached 100,000 clients according to a customer service rep who let slip they had marked the milestone with a pizza party the day before.
Lacavera won’t confirm any numbers until next week, but said people were going to be surprised.
Like Public’s executives, he said the battle heating up in the mobile market just goes to show Wind’s business plan is working and that their target market is worth fighting for.
“We’re happy to see the competition heating up. . . . It is great for Canadians and shows the impact Wind is having.”
Wind has faced problems with the density of its network, leaving some customers with inconsistent signal strength and other problems, a top priority for improvement, he said.
He called Chatr a trick that Canadians wouldn’t be fooled by.
“It is still just Rogers—they are just trying to pretend they are competing.”
Unlike Public and Chatr, which have no data or smartphone options at the moment, Wind and Mobilicity have a full spectrum of products. In response to Chatr, Wind has re-introduced a $150 bill credit to anyone who signs up from one of the incumbent providers.
Meanwhile, Wind is facing its own legal threat. Public Mobile has asked the federal court to review the federal government’s decision to overturn a CRTC’s ruling that would have stopped Wind from launching. The CRTC had ruled that Wind, previously known by the name of its parent company Globalive, was in violation of Canadian ownership rules due to the amount of foreign backing it had from Egyptian telecom company Orascom.
The case is expected to be heard this fall.
While there is still a lot of instability in the market, Kaminer predicts things will settle down once companies have figured out their core strengths and key competitors. But even then, fears remain that the incumbents will buy up the new entrants once a five-year clause against takeovers expires in 2013.
Rogers set a precedent for that when it bought up Fido in 2004 and eliminated the upstarts’ unlimited plans and $0.25 roaming in the United States.
But Wind at least has no plans of selling out, says Lacavera, who has Yak and One Connect in his business portfolio.
“We are not like that, we are looking to build a good business. . . . We are in to build it and own it.”
Rogers did not return calls for comment, nor did Telus. A spokesperson for Bell said the company was releasing its quarterly results on Thursday and couldn’t comment beyond saying that it would keep its three brands competitive (Bell has Solo and Virgin) and take advantage of the largest distribution network and top-tier products.
