Increased use of higher-priced smartphones has boosted revenue but pressured profit
Los Angeles, CA (PRWEB) February 14, 2013
The Wireless Telecommunications Carriers industry has had a strong past five years, as wireless coverage has expanded and a greater number of Canadians have adopted smartphones and tablets, boosting demand for high-margin mobile broadband services. Consequently, over this period, revenue is expected to expand at an annualized rate of 4.9% to $20.3 billion. “Revenue is expected to grow further in 2012 as carriers continue to expand the coverage of their 4G LTE networks and more consumers upgrade to LTE-ready smartphones,” says IBISWorld industry analyst Kevin Boyland.
The Wireless Telecommunications Carriers industry is highly concentrated, with the three largest players controlling a large percentage of the market. However, that dynamic has slowly started to shift, following Industry Canada's 2008 auction of advanced wireless services (AWS) spectrum licences. Spectrum was set aside in the auction to allow new players to enter the industry in an effort to stimulate competition. Notable new industry participants that acquired spectrum in the auction include WIND, Mobilicity, Public Mobile and Quebecor. As a result of the auction, the number of industry firms has increased at an estimated annualized rate of 2.9% over the past five years. The industry's largest players (Rogers Communications, Telus Communications and Bell Canada) are highly diversified and operate in numerous telecommunications markets, giving them substantial economies of scale and scope. “The industry naturally tends toward a high level of concentration due to the capital-intensive nature of operating a nationwide network and the need to spread fixed costs across a broad subscriber base to maintain profitability,” adds Boyland. A large subscriber base is critical to competitiveness, as it delivers considerable economies of scale and thereby enables a carrier to offer cheaper prices and realize higher margins.
While these new players still only account for a small percentage of the market, they have pressured overall margins by offering attractive promotional offers to lure subscribers away from incumbent carriers. Profit has also been pressured by increasing smartphone activations; while an increasing use of smartphones aids carriers in the long run (smartphone users typically have bills twice those of voice-only subscribers), in the short term it translates into increasing subsidies paid to make the devices more affordable to consumers. Still, average industry profit remained strong in 2012.
Over the five years to 2017, revenue is forecast to grow. As 4G coverage increases, the number of mobile subscribers is forecast to increase. Some of the industry's smaller players are expected to grow their budding operations and become formidable opponents to industry incumbents in certain regions. However, other less successful firms will likely be acquired or exit the industry. Amid heightened competition in a market nearing saturation, the number of firms in the industry is expected to decrease over the next five years. For more information, visit IBISWorld’s Wireless Telecommunications Carriers in Canada industry report page.
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IBISWorld industry Report Key Topics
Firms in this industry primarily provide wireless telecommunications services to mobile devices over switching and transmission facilities that they own and operate. Firms that provide service through a combination of owned and leased facilities are also included in this industry. Industry firms primarily generate revenue through prepaid voice telephony services, postpaid voice telephony services, data services and equipment sales.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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