The shifting Quebec telecom landscape is poised to erupt with fresh competition, new services and a potential price war.
For consumers, it will mean lower prices, more diverse offerings and more advanced technologies being deployed; for telecom companies, it means increased rivalry, profit margin pressure, and huge capital expenditures.
Quebecor telecom division, Vidéotron Ltée, is preparing to launch wireless services in Quebec this summer, a vow it reaffirmed Wednesday after earlier delays. But BCE Inc. Bell Canada unit has not been a sleeping giant: Montreal-based Bell is investing millions in the province to launch a high-speed fibre-to-the-home network in Quebec City.
"This is certainly a new environment we need to face," said Quebecor president and chief executive officer Pierre Karl Péladeau as the company posted a slump in first-quarter profits.
At the same time, wireless upstart Public Mobile Inc., which has opened stores to pre-sell phones but has yet to turn on its network, has seen a huge uptake in Montreal.
Quebecor's results Wednesday also revealed that Vidéotron's pick-up of digital TV, home phone and Internet customers continues to mature. This is not a surprise, and comes after the company gained 51 per cent of Quebec's residential Internet market and 30 per cent of the residential phone market, according to the Convergence Consulting Group Ltd., largely at the expense of Bell.
Wireless is the next growth area for cable companies such as Vidéotron. However, the firm will need to absorb the huge costs of launching this network and pulling in customers: Quebecor's vice-president of finance, Jean-François Pruneau, warned analysts Wednesday that it will need to swallow some losses to meet subscriber growth targets. Telcos such as Bell also need to protect wireless market share because they have not only seen maturation in their core businesses, but huge declines in land line telephone.
In Western Canada, Telus is investing about $1.3-billion ahead of Shaw planned wireless launch in late 2011. It's a region where Maher Yaghi, a Montreal-based analyst with Desjardins Securities, sees the beginnings of a price war.
"In Eastern Canada, the players don't have all the pieces of their strategy on hand yet," Mr. Yaghi said. "Then you can see if those two guys are going to see the same thing that's happening out West will happen here."
Bell is waiting to launch its advanced Internet-based TV product, which is a bigger threat to its rival than its current satellite offering; Vidéotron, meanwhile, is waiting on its aggressively priced wireless launch, which could end up being delayed since the company is petrified of a botched launch ruining its existing relationships with cable subscribers.
"We're not going to let Bell eat our turf," said Robert Dépatie, Vidéotron's president and chief executive officer.
Meanwhile, new wireless entrants have already started a price war and introduced aggressive new services, such as unlimited national long-distance. Wind Mobile came out with cheap unlimited plans, but Mobilicity, which will likely launch in early June, already appears set to undercut Wind. This is great for consumers, of course, though it may thin profit margins among new entrants and make it easier for them to falter and get bought up.