With two CEOs recently departed from the Canadian wireless start-ups they helped get off the ground, a prominent industry analyst is asking whether the new companies have a fighting chance in a sector still overwhelmingly dominated by three big players.
Mobilicity announced on Friday that president and CEO Dave Dobbin was leaving the company and was being replaced by chief operating officer Stewart Lyons and chairman John Bitove, who was moving into an executive chairman role that would see him take more of a hand in day-to-day management of the company. The move comes about six months after veteran telecom executive Ken Campbell left Globalive Wireless Management Corp.'s Wind Mobile, another new entrant, and was replaced by the company's chairman, Anthony Lacavera.
On Monday, Canaccord Genuity analyst Dvai Ghose published a bearish research note noting the departures, as well as other management shuffles at the two companies, and wondered whether the Canadian government's attempt to engineer competition was failing in a sector where BCE Inc. , Rogers Communications Inc. and Telus Corp. still have roughly 95 per cent of the wireless subscribers.
Part of this may have been a reliance on business plans whereby consumers had to pay full price for their devices, without the device subsidies that are common in Canada and result in two- or three-year contracts that can cost dearly to break, he said.
“The independent new-entrant model appears to be failing,” Mr. Ghose writes. “They aimed to differentiate through low priced unlimited voice and data (plans) and no contracts in return for unsubsidized devices. While consumers dislike complex and expensive incumbent price plans and contracts, they have also shown an unwillingness to buy unsubsidized devices.”
Of course, Canadians have benefited from Wind, Mobilicity and Public Mobile, another new entrant offering service in Ontario and Quebec, as established wireless providers were forced to offer cheaper prices or offer more value for money. In some cases, as Brahm Eiley of Convergence Consulting Group Ltd. has pointed out, new entrant pricing plans have been as much as 60 per cent cheaper than the plans of Bell, Telus and Rogers.
In email to The Globe, Globalive's Mr. Lacavera said there was only room in Canada for one new national provider, but that an upcoming government auction of wireless licences in 2012 had to be engineered for competition like the one in 2008, which allowed him to bid against well-capitalized incumbents such as Bell.
“Globalive is well positioned to be Canada's new national carrier,” he said. “With government policies that permit us to acquire more spectrum in the next auction we are committed to offering all Canadians, both in cities and rural areas, cost effective wireless service.”
But Mr. Ghose suggests that the regulatory winds might be “shifting toward incumbents,” given what he sees as the likelihood of a spectrum “cap” – which would limit the amount of wireless licences any one company can buy – as opposed to a spectrum set-aside, which the new entrants would prefer. He also suggests that loosening the sector's strict foreign ownership restrictions, which would benefit Wind and allow well-funded foreign wireless giants to look at buying licences in Canada, has fallen off the radar of the majority Conservative government.
“Independent new entrants may be facing 'a perfect storm,' ” Mr. Ghose concludes. “However, this is a problem for Industry Canada, which is committed to fostering more wireless competition.”
Mobilicity's Mr. Bitove, meanwhile, said in e-mail that, “We are comfortable with the performance of the business to date, but... nobody is doing wireless in Canada the way consumers want it and if we need to continue to make changes, we will. We are young.”