UPDATE The Canadian Competition Bureau still has reservations about approving the pending Roger Communications (NYSE: RCI) and Shaw Communications (NYSE: SJR) merger. The sale of Shaw’s Freedom Mobile to Québecor, as Inside Towers reported, may not be enough to quell concerns that Canada’s wireless market needs more competition to achieve lower prices. Canadians pay some of the highest mobile data charges in the world.
The Competition Bureau and Ministry of Innovation, Science and Economic Development (ISED) think the Shaw Mobile brand still gives the Rogers-Shaw deal too much wireless market power in British Columbia and Alberta, big western Canadian markets served by both TELUS Mobility and Rogers Wireless. Bell Wireless has access to the west via a network sharing agreement with TELUS.
Such concerns may be well justified for the Canadian market. But the question remains: How to spawn a competitive fourth national carrier like DISH Network in the U.S.?
The Challenges
The challenges are manifold. Canada is a huge country, slightly larger than the U.S. in total area (9.98 million sq km vs 9.83 million sq km) but with a much smaller population of around 38 million compared to about 332 million people in the U.S. Furthermore, it is estimated that over 90 percent of Canada’s population resides within 100 miles of the U.S. border that stretches roughly 3,000 miles coast to coast. Yet many Canadians live throughout this vast country. So, building and operating a nationwide wireless network in Canada is hugely expensive and takes a long time to cover a smaller, disbursed population compared to the U.S.
How to pay for a fourth national network? Note that the Big 3 mobile network operators, Rogers, Bell, and TELUS, had large, and profitable, wireline operations before venturing into wireless – Rogers in cable, and Bell and TELUS in telephone. These companies can subsidize their wireless network builds from wireline cash flows and can leverage their existing infrastructure assets to raise capital.
In 2022, Rogers will invest close to $1.3 billion in wireless capex while Bell and TELUS, benefiting from the network sharing arrangement, will each spend about $1 billion. At the end of 1Q22, the Big 3 MNOs served a total of 28.9 million subscribers or 84 percent of the Canadian mobility market, led by Rogers Wireless.
Smaller MNOs
The only pure-play MNO of any scale is Freedom Mobile with nearly 2.2 million subscribers at the end of 1Q22. Freedom Mobile, owned by Shaw Communications, has 6 percent market share, mostly in urban areas of Ontario, British Columbia, and Alberta. Freedom Mobile’s annual capex is about one-quarter that of Bell and TELUS. Shaw Mobile, a mobile virtual network operator division of Freedom Mobile, sells bundled wireless and internet access services in Alberta and British Columbia.
Vidéotron Mobile, a Québecor subsidiary, operates a wireless network throughout Quebec and in Ottawa through a network sharing agreement with Rogers.
SaskTel Mobility operates as a Saskatchewan government department and serves about 640,000 subscribers in the province of Saskatchewan, representing a 2 percent national market share.
In addition, there are another eight facilities-based MNOs such as Eastlink Wireless, TbayTel Mobility and Xplore Mobile that serve targeted regional and smaller local and rural markets. These regional MNOs together make up another 3 percent market share.
A Potential Outcome
The Competition Bureau and ISED want to assure Canadians of competitive wireless services at lower prices. A fourth competitor is viable though not likely at the scale of the Big 3. Now under Québecor, a combined Freedom Mobile and Vidéotron Mobile would garner 11 percent of the market with nearly 4 million subscribers in key markets in Ontario and Quebec in the east and Alberta and British Columbia in the west.
Even at a smaller scale, though, the combination could attract wireless subscribers in key major metros in sufficient numbers to force the Big 3 MNOs to respond with more competitive (read, lower) prices.
Such an outcome remains a uniquely Canadian quandary.
By John Celentano, Inside Towers Business Editor
Reader Interactions