Wireless companies go cheaper than cheap
Fido to be relauched with new logo and undated plans
David George-Cosh , Financial Post Published: Sunday, November 02, 2008
It's a mantra often repeated by Canada's new wireless entrants -- how low can you go?
In a market that sees BCE Inc., Telus Corp. and Rogers Communications Inc. lure their customers with sexy smartphones and multi-media devices, it appears the only way to put a dent into Canada's incumbent cellphone players is by selling cheap, no-frills wireless plans.
Now another company looks to elbow itself into to budget-conscious consumer. Rogers' Fido brand is set to be relaunched Tuesday with a new logo as well as updated plans.
It is offering no system access fee, lower monthly rates and an expanded product lineup, according to sources familiar with the matter.
"They're working on something big," said an Ontario-based Fido store manager who declined to be named. "This is the first time in five years they haven't told me what our Q4 plans are."
The announcement will add another player to the crowded mix of companies. Executives from both Globalive Communication Corp. and BMV Holdings said they're going to offer "unlimited, no-frills" plans that will not cost more than $40. It is widely expected that Data and Audio-Visual Enterprises Wireless will offer a similar service.
Furthermore, by the time these new entrants are ready to launch a cellphone service sometime next year, established discount offerings by Telus' Koodo Mobile, BCE's Virgin Mobile Canada and Solo brands and now Fido will have a clear head start.
So, a good question many industry insiders are asking themselves -- how can anyone make money in such a crowded market?
"If we all acknowledge that pricing is going to go down, the guy who will win is the guy who can absorb that the most," said Genuity Capital Markets analyst Dvai Ghose.
Aside from the costs of buying spectrum and network hardware, costs will have to be controlled mainly through handset purchases and distribution channels.
Details on how the new entrants can differentiate themselves in these ways are fairly scant. Globalive, by leveraging its relationship with Orascom Telecom, is said to snap up cheap devices made by Nokia Oyj. BMV Holdings, led by CEO Alek Krstajic, a former executive at Bell Mobility and Rogers Cable, is said to be talking to Motorola Inc. as well as Chinese and Korean handset manufacturers, but it may have some difficulty executing as there are no commercially-available phones that operate on the 1.9 GHz spectrum frequency they've purchased.
As for distribution, get ready to find cellphones for sale in the most unlikely places - like so-called "dollar stores." Whoever can negotiate efficient commission rates will have a major advantage, said Mr. Ghose.
New entrants will also have the luxury of starting services with little bandwidth congestion, which will allow them to have room to offer unlimited plans to customers, says National Bank Financial analyst Greg MacDonald.
"They don't have capacity restriction issues, nowhere near what the incumbents have," Mr. MacDonald said. "As a result of that, they tend to offer higher usage plans for flat rates and that's appealing to customers, especially for landline replacement."
Indeed, with tight credit markets, some entrants have already begun to rethink their wireless ambitions. Shaw Communications Inc. has put there cellphone service on hold and Quebecor Inc.'s Videotron unit will be ready in just over one year. Only Eastlink, the cable unit of Bragg Communcations Inc. remains the sole new entrant which has not shed light on its wireless plans.
Still, the new players may be onto something. The monthly average revenue per unit (ARPU) may be a victim, with growth in consumer spending widely expected to hit the skids over the next several years. According to a report by IE Market Research, the ARPU growth has begun to see notable declines, down from about 5% last year to 2.9% in the most recent quarter.
Of course, the devil is in the details. Each new entrant has not revealed the specifics of their plans yet but will certainly look towards brands like Koodo, Fido, Virgin Mobile and Solo for a way to remain competitive in the market.
"If they launch an unlimited play as a preemptive move, then all that's doing is to cause me to launch at a lower price point," Mr. Krstajic said.
Fido to be relauched with new logo and undated plans
David George-Cosh , Financial Post Published: Sunday, November 02, 2008
It's a mantra often repeated by Canada's new wireless entrants -- how low can you go?
In a market that sees BCE Inc., Telus Corp. and Rogers Communications Inc. lure their customers with sexy smartphones and multi-media devices, it appears the only way to put a dent into Canada's incumbent cellphone players is by selling cheap, no-frills wireless plans.
Now another company looks to elbow itself into to budget-conscious consumer. Rogers' Fido brand is set to be relaunched Tuesday with a new logo as well as updated plans.
It is offering no system access fee, lower monthly rates and an expanded product lineup, according to sources familiar with the matter.
"They're working on something big," said an Ontario-based Fido store manager who declined to be named. "This is the first time in five years they haven't told me what our Q4 plans are."
The announcement will add another player to the crowded mix of companies. Executives from both Globalive Communication Corp. and BMV Holdings said they're going to offer "unlimited, no-frills" plans that will not cost more than $40. It is widely expected that Data and Audio-Visual Enterprises Wireless will offer a similar service.
Furthermore, by the time these new entrants are ready to launch a cellphone service sometime next year, established discount offerings by Telus' Koodo Mobile, BCE's Virgin Mobile Canada and Solo brands and now Fido will have a clear head start.
So, a good question many industry insiders are asking themselves -- how can anyone make money in such a crowded market?
"If we all acknowledge that pricing is going to go down, the guy who will win is the guy who can absorb that the most," said Genuity Capital Markets analyst Dvai Ghose.
Aside from the costs of buying spectrum and network hardware, costs will have to be controlled mainly through handset purchases and distribution channels.
Details on how the new entrants can differentiate themselves in these ways are fairly scant. Globalive, by leveraging its relationship with Orascom Telecom, is said to snap up cheap devices made by Nokia Oyj. BMV Holdings, led by CEO Alek Krstajic, a former executive at Bell Mobility and Rogers Cable, is said to be talking to Motorola Inc. as well as Chinese and Korean handset manufacturers, but it may have some difficulty executing as there are no commercially-available phones that operate on the 1.9 GHz spectrum frequency they've purchased.
As for distribution, get ready to find cellphones for sale in the most unlikely places - like so-called "dollar stores." Whoever can negotiate efficient commission rates will have a major advantage, said Mr. Ghose.
New entrants will also have the luxury of starting services with little bandwidth congestion, which will allow them to have room to offer unlimited plans to customers, says National Bank Financial analyst Greg MacDonald.
"They don't have capacity restriction issues, nowhere near what the incumbents have," Mr. MacDonald said. "As a result of that, they tend to offer higher usage plans for flat rates and that's appealing to customers, especially for landline replacement."
Indeed, with tight credit markets, some entrants have already begun to rethink their wireless ambitions. Shaw Communications Inc. has put there cellphone service on hold and Quebecor Inc.'s Videotron unit will be ready in just over one year. Only Eastlink, the cable unit of Bragg Communcations Inc. remains the sole new entrant which has not shed light on its wireless plans.
Still, the new players may be onto something. The monthly average revenue per unit (ARPU) may be a victim, with growth in consumer spending widely expected to hit the skids over the next several years. According to a report by IE Market Research, the ARPU growth has begun to see notable declines, down from about 5% last year to 2.9% in the most recent quarter.
Of course, the devil is in the details. Each new entrant has not revealed the specifics of their plans yet but will certainly look towards brands like Koodo, Fido, Virgin Mobile and Solo for a way to remain competitive in the market.
"If they launch an unlimited play as a preemptive move, then all that's doing is to cause me to launch at a lower price point," Mr. Krstajic said.
