With Globalive now on the verge of rolling out its wireless network, Canada’s incumbent telecom companies are expected to see new pressure on profits.
Globalive is out of regulatory limbo after Friday’s federal government decision to overturn the CRTC and allow the company to launch. A campaign behind the Wind Mobile brand is expected to start next week, and BMO Nesbitt Burns telecom analyst Peter Rhamey said Friday in a report: “We continue to be cautious on the Canadian telecom sector, reflecting the negative impact of competitive entry on profitability.”
The three dominant players - BCE BCE-T, Telus T-T and Rogers Communcations RCI-T - stand to see a 5 to 10 per cent decline in subscriber additions next year, according to Mr. Rhamey’s estimates. BMO Nesbitt Burns projects this market share loss, along with a price war, will erode earnings per share by 2.5 per cent at BCE and 5 per cent at Telus and Rogers, which look to wireless for a larger share of their profits.
“While we had expected a favourable outcome for Globalive, the unconditional nature of the ruling was a surprise,” said Mr. Rhamey. He added: “We expect that the stocks will remain under pressure ahead of Globalive’s launch, given that launch pricing remains unknown. We do not expect any legislative moves on foreign ownership rules in the short term as a result of this decision.”
