Telus signals wireless shift as 700 MHz auction closes

There’s change afoot at the top of Canada’s wireless carrier leaderboard.

News that Telus has moved past Bell to become Canada’s second-largest wireless company may not do much to rewrite the mobile landscape anytime soon, but as Industry Canada gets ready to announce the results of the 700 MHz spectrum auction - Industry Minister James Moore tweeted that the results of the auction, which kicked off Jan. 14th, will be made public at 5 p.m.ET today in Ottawa – it’s already laying the foundation for more fundamental, longer-term shifts among the Big Three.

Based on figures released as part of its most recent quarterly financial report, Telus led Bell in wireless subscribers for its third and fourth quarter, the first time it surpassed Canada’s oldest telecom company for two consecutive quarters. Telus ended the year with 7.807 million wireless subscribers, ahead of Bell’s 7.778 million. The figures do not include the estimated 222,000 prepaid customers Telus acquired when it bought Public Mobile Inc. in October. With an annualized wireless subscriber growth rate of 1.8 per cent in 2013, Telus led Bell (up 1.3 per cent) and Rogers (0.7 per cent).

Growth trumps size

While Bell’s parent company, BCE, is larger and more diversified than Telus – its broadcast arm now includes CTV, Astral Media and a major stake in Maple Leaf Sports & Entertainment Ltd., and its quarterly revenues in the most recent quarter were $5.38 billion, compared to Telus’s $2.95 billion – the change at the top highlights Telus’s market-leading growth after years of little relative movement between Canada’s big three carriers.

Telus pulled in $1.43 billion from wireless operations in its most recent quarter, a 4.1 per cent increase year-over-year. BCE’s wireless revenues rose 3.2 per cent in the same period, to $1.51 billion, while Rogers $1.67 billion was 2 per cent ahead. In a research note, Barclays Plc analyst Phillip Huang called Telus “one of the fastest growing telcos in the world.”

Rogers, with 9.503 million subscribers at year-end, still leads the market by a comfortable margin, but trouble is brewing as its new president and CEO settles in. The company’s net earnings in Q4 2013 were C$320 million, off 39 per cent from the year-ago period. Revenues of $3.24 billion were also down, by 1 per cent, compared to Q4 2012. Guy Laurence, the ex-Vodafone chief who took over the reins from a now-retired Nadir Mohamed only last month, told analysts on last week’s quarterly earnings call that the numbers were “not satisfactory to me.”

It’s clear a growth-focused Telus is already keeping Laurence awake at night.

“The foundation of the company is strong and we continue to generate healthy margins and cash flow, but our rate of growth has slowed,” Laurence said. “I know we can do better, and this is a key focus for me and the management team.”

Auction results expected

Laurence will need to move fast as the 700 MHz spectrum auction draws to a close. The new frequencies will give carriers access to high-quality, high-speed signals that can penetrate into buildings and underground and will require less wireless tower infrastructure to deliver.

Being first to market with services based on the newly-available, high-quality spectrum could give carriers an important psychological advantage among Canadian subscribers looking for additional value in a market where the Big Three still own 92 per cent of the pie. Additional acquisitions and new service offerings are also on the menu as a suddenly vulnerable Rogers attempts to preserve its market-leading position.

With no new players on the horizon – there were no foreign investors in the current spectrum auction, and Industry Canada’s recently proposed changes to ease foreign investment and remove obstacles for regional operators won’t have any impact until the 2.5 GHz auction kicks off in April 2015 – consumers can expect aggressive moves between the incumbents as the battle for Canada’s wireless future heats up.

Carmi Levy is a London, Ont.-based independent technology analyst and journalist. The opinions expressed are his own.