Canada’s largest telecom providers are clamping down on costs as they feel the financial pinch of the COVID-19 pandemic.
Rogers Communications Inc., Telus Corp. and BCE Inc. are facing a slew of headwinds, ranging from a sharp drop in roaming revenues to stalled wireless subscriber growth after the global health crisis halted travel and temporarily shuttered the majority of their stores.
Some customers are moving to downgrade their wireless plans or are inquiring about flexibility around bill payments, a trend that Rogers chief executive Joe Natale expects to continue as unemployment rises.
“We’ve got people that are struggling financially and they’re calling to look for a better priced plan," Mr. Natale said during a virtual telecom conference hosted by TD Securities on Wednesday. “That’s kind of normal in these circumstances. We saw it in ’08,” he said, referring to the financial crisis that saw many people tighten their belts.
And although stores have begun to reopen, telecom executives say it’s unclear how soon Canadians will feel comfortable returning to stores and malls. “It’s very quiet out there. We’ll see what happens as we enter the busier half of the year," Mr. Natale said.
Telus, meanwhile, has launched an initiative to reduce its costs by about $250-million, including by changing its marketing strategy, shutting down buildings and deferring hiring and salary increases.
“It started immediately as soon as we saw some of the pressures starting to come through," chief financial officer Doug French said Wednesday.
Telecom companies are finding other cost savings. For instance, concerns about spreading the virus accelerated an industry-wide trend toward self installations, where customers are sent devices such as modems or personal video recorders and given instructions on how to set them up, reducing the costs associated with dispatching technicians in trucks.
And the slowdown in wireless-customer growth means providers are shelling out less to subsidize phones – a practice they’ve been moving away from in recent months as they shift toward financing plans, in which customers pay off their phones in instalments and pay a separate cost for service. BCE no longer offers phone subsidies for Bell customers, and will soon do away with them for its Virgin Mobile brand, as well, CEO Mirko Bibic said.
“It allows us to manage what had become, frankly, excessive subsidy costs, as handsets were getting more and more expensive,” Mr. Bibic said during Wednesday’s conference. “There is a big potential for cost savings.”
Over all, the sector is likely to fare better than others hit harder by the economic slump. “We expect the revenue impacts on our industry to be much milder than some other industries," Mr. Natale said. “We’ll see some shorter-term pressure on our financial results, as you would imagine. However, overall cash flow and liquidity will remain strong.”
Executives are also hopeful that the performance of Canada’s telecom networks in handling the huge surge in traffic needed to support remote working will improve how the industry is perceived by policy makers and regulators ahead of several key regulatory decisions.
The Canadian Radio-telecommunication Commission is set to rule shortly on whether carriers should be forced to open up their wireless networks to resellers known as mobile virtual network operators, or MVNOs. Without their own networks to maintain, MVNOs offer cheaper service by piggybacking on the networks of the big telecoms.
Proponents say they would foster competition and bring down wireless prices, which the Liberal government has committed to reducing by 25 per cent. BCE, Rogers and Telus have argued that mandating access for resellers would reduce the incentive for network operators to invest.
“We really should not and cannot take any risks of negative rulings that are going to blunt investment in networks, particularly as we enter the work-from-home era … I think the regulators and public policy makers are going to appreciate that now more than ever," Mr. Bibic said.
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