Cellphone industry analysis in Canada

Canadian Cell Phone Industry

The cellphone market in Canada is estimated to be worth $16 billion per year. For much of its existence, it has been dominated by three firms, Rogers, Telus and Bell Mobility. There are also nine local operators. Industry Canada reports that in 2006 there were 17 million wireless phone subscribers. Wireless penetration is estimated at 62%, which is 27th in the top 30 OECD countries. However, penetration is increasing by an estimated 1.5 million subscribers per year (Swedish Trade Council, 2007). With some industry estimates at around 67% penetration, the general sense is that the consumers under 60 not yet with a phone are "rejecters," that is to say they have no intention of purchasing a phone in the next year. Also worthy of note is that Canadians prefer phones with more basic functionality, and are the second-stingiest when it comes to the price they are willing to pay for a new phone, behind only Pakistan (Persaud, 2009).

The market for cellphones in Canada is characterized by strict government regulations of telecommunications ownership. This has limited competition to a number of large domestic carriers. To address this situation and bring more competition into the market, the government held an auction in 2008 on around 250 new frequencies. The auction had 40% of the frequencies reserved for new entrants to the market with the remaining 60% open to all bidders (CBC, 2007). Among the entrants drawn into the market were Quebecor, who has a cable subsidiary in Ontario and Globalive, a Toronto-based firm backed by foreign money (Lasalle, 2008). Several of the bidders were Canadian firms not currently in the industry. In addition to Quebecor, bids were entered from MTS Allstream, Shaw, and Eastlink. The auction ended in 2008, with the Big Three winning the most bids. However, it opened the door for new entrants into the marketplace.

At this point, however, the Big Three remain predominant. According to their respective 2008 annual reports, Bell has 6.5 million subscribers (31.7% share); Rogers has 7.9 million subscribers (38.5% share); and Telus has 6.1 million subscribers (29.7%).

The cell phone industry's wireless providers partner with cellular phone and wireless device manufacturers in order to provide devices to consumers. In the third quarter of 2008, an estimated 3,000,000 devices were shipped, indicating strong device turnover nationwide. The market leader in devices is Samsung, with a 27.8% share (Samsung/IDC, 2008). The market is still growing, despite the economic downturn, with a growth rate of 4% expected for 2009 (IDC, 2009).

One strong segment in the industry is the advanced smartphone industry (Blackberry, iPhone). This segment now accounts for 21% of the market, driven by an under-30 demographic (Persaud, 2009). These devices are marketed through the usual providers. Blackberry has deals with all three providers; the iPhone is marketed exclusively through Rogers. The other main segment is the general wireless (regular cell phone) market.

The government plays a major role in the cell phone business in Canada. Extensive regulation is carried out by the Canadian Radio-television Telecommunications Commission (CRTC). The CRTC regulates the industry tightly, including guidance on pricing and protecting the market from new entrants. The auction represented the first time the CRTC opened the market up. At present, the new entrants who placed winning bids are just in the process of launching, so there is no expectation of significant future CRTC activity in the cell phone industry.

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