As vaccine distribution expands and borders begin to reopen, Canada’s telecom industry will bounce back with strong gains in subscribers, say telecom analysts who believe 2021 and 2022 will “set up well for the sector.”
Jeff Fan, an analyst at Scotiabank, said in a note that for the first time in three years “we are bullish on Canadian wireless.”
“Our assumption is that vaccines will reopen the Canadian border, which will drive immigration and international travel,” he wrote.
On December 14, Canada administered the first doses of a COVID-19 vaccine.
“For the first time since 2017, we expect that in 2021, the Canadian wireless sector will simultaneously experience higher subscriber net additions [year-over-year] and positive [Average Revenue Per User] growth, led by the return of immigration and international roaming,” Fan wrote.
As the world went into lockdown and Canadians stopped travelling mid-March, Rogers, Bell, and Telus faced revenue declines in roaming fees. The note said that the general competitive impact on wireless ARPU in the past two years has been about 1 to 1.5 per cent year-over-year, but this year the roaming impact on ARPU was about 2 to 4 times larger. Most of that impact was concentrated in Q2 and Q3, it added.
The note predicts that when immigration returns it will lead to “approximately” 20 per cent year-over-year growth in monthly paid wireless subscriber net additions. Fan adds that 40 per cent of lost roaming revenue will return in 2021, with the remaining 60 per cent expected to return in 2022.
“We also believe that a bigger new subscriber pool will reduce some of the competitive activities,” he added.
Edward Jones' analyst Dave Heger agreed with Fan in an interview and said that the uptick likely will happen in the second half of the year.
“Assuming that people are travelling more, especially in the second half of the year, I would think that you will see roaming revenue pick back up,” he said. “Any pickup in travel will certainly likely drive an improvement in ARPU [on a] year-over-year basis.”
Heger added that while the lack of travel has affected ARPU, so has the shift to higher-tiered unlimited data plans.
“In the past year or so [carriers] had a hit from a lot of customers who were at higher-priced plans who before were generating a lot of overage fees on their data have moved on to unlimited plans,” he said.
Heger did add that carriers might also start to see more customers on lower-tiered plans who currently have less data but now want more data to switch to unlimited plans.
“That actually helps ARPU,” he said. “People kind of move up into an unlimited plan from a lower-price plan.”
Heger previously indicated that more Canadians are likely to upgrade to unlimited plans in the hopes for more data as 5G becomes more available.
With files from the Canadian Press