Latest numbers from the Global Wireless Matrix show growth in Canadian carriers’ profitability and per-user revenue is starting to reverse itself.
Something very unusual is happening in Canadian wireless services: for the first time in a long time, the average bill might actually be set to go down.
That’s not according to the somewhat contradictory findings of the recent government-sponsored Wall report, but rather to the cold, hard science in the latest edition of the Bank of America Merrill Lynch Global Wireless Matrix. The industry bible tracks quarterly results from carriers big and small in 48 countries, including 22 developed nations.
Here’s what average revenue per user growth was like in each developed country in the latest quarter compared to a year earlier, as of April, 2014:
As is evident, Canadian wireless carriers saw a small contraction in their ARPU – a statistic that’s synonymous with the amount of the average subscriber’s bill – of 0.7 per cent. They still reaped the highest per-user revenues among all countries tracked by the Matrix – $56.32 U.S. – but that small dip is notable for several reasons.
For one, Canada appears to have finally come in line with what’s happening in the rest of the developed world. Only two countries – Australia and the United States – saw actual year-over-year increases to ARPU, while every other nation saw declines.
Bills have been getting smaller in most developed countries for several years, despite wireless customers using more and more data. Canada and the United States have been general exceptions to that rule.
The quarterly Canadian ARPU decline is also pointing the way to the first annual decrease since 2011. The wireless market, dominated by Bell, Rogers and Telus, saw small declines between 2009 and 2011, which is when they felt the most competitive heat from new entrants such as Wind, Mobilicity and Videotron.
The Wireless Matrix is still predicting a small 0.4-per-cent increase in ARPU for 2014 as a whole, but a 0.2-per-cent decline is expected for 2015.
Also notable is Canadian carriers’ respective decline in profitability, as seen in the similar year-over-year comparisons of earnings before interest, taxes, depreciation and amortization:
A quarter ago, the same carriers had the third-best EBITDA out of 22 developed nations and were seventh in growth. In the latest quarter, they dropped to eighth and ninth, respectively. Merrill Lynch’s projections for next year see that profitability continuing to decline.
These seem like small numbers but they’re important because they represent a strong shift in direction: the size of customer bills and therefore the profitability of the big carriers are finally poised to head downward after several years of positive growth.
The cause is either competition or government intervention, with the reality likely being a combination of both. While the big carriers jacked up prices last year to compensate for the CRTC’s elimination of three-year contracts, the same regulations have led to caps on extraneous charges and roaming fees, which are likely having an effect on those monthly bills.
Moreover, while new entrant Mobilicity is struggling with creditor protection, Wind seems to have, ahem, caught its second wind. The company recently announced strong revenue and subscriber results, both of which were likely buoyed by its recently introduced unlimited North American roaming plans and by the Big Three pushing the reasonable limits of what subscribers are willing to pay.
While it took some time and the returns are so far very modest, it looks like the government and CRTC may have finally wrestled the wireless market in their desired direction – lower bills and lower profits for the big carriers. Continued declines are not guaranteed, but with the next spectrum auction heavily tilted again toward newer competitors such as Wind and Videotron, that slow downward push may soon see some additional momentum.