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5.0 Telecommunications

5.5 Wireless

Overview

Canada's total mobile revenues, as a percentage of total telecommunications revenues, increased from 38% in 2007 to 40% in 2008 and remained the largest revenue component of Canadian telecommunications revenues.

Market share of the three largest wireless service providers (WSPs) did not change significantly in 2008 and continues to account for over 94% of the wireless market in Canada. Of the top three carriers, Rogers Wireless remained the dominant player with respect to the number of subscribers with a 38% market share, while the Bell Group²³⁸ and TCC each held 27%. The remaining 8% was shared among regional WSPs (MTS Allstream and SaskTel), small incumbent TSPs, and mobile virtual network operators (MVNOs).

Highlights

• In 2008, the wireless industry, excluding paging, grew 10.5% in terms of revenues and 9.0% in terms of the number of subscribers.
• The annual average revenue per user (ARPU) increased approximately 3% from $59 per month in 2007 to $60 per month in 2008.
• Canada's AWS spectrum auction that was conducted by Industry Canada raised over $4.26 billion in 2008.
• Data revenues grew at an annual rate of 35.2% in 2008.

Description of services

The wireless market segment comprises telecommunications services provided via mobile wireless access facilities. These services include mobile telephony, mobile data such as text messaging, roaming, wireless Internet access, and paging services. While satellite private line services are included in the data and private line section of this report, the satellite services associated with mobile telephones are included in this section.

In addition to voice communications over wireless networks, new wireless technologies and applications are enabling users to send text messages from one device to another, as well as multi media messages which include photos, graphics, videos, and audio clips. Inter carrier text messaging and data sharing between users has been in place for several years and is expected to continue to grow as existing and new carriers forge network agreements, and terminal equipment makers introduce new devices.

Mobile wireless services are generally billed on a usage basis for both voice and data services. Subscribers have a choice of two payment options: prepaid and post paid. Prepaid plans require the subscriber to purchase the wireless service prior to use, while post paid plans require payment on a monthly basis after using the service. Customers typically pay a per-minute rate for a prepaid plan, while those subscribing to post paid plans pay for a service package that includes defined minutes of use, an overage minute rate, data features, and other optional services such as voice mail, call display, and call waiting.

Sector description

Over 99% of Canadians had access to wireless services in 2008, of which approximately 74.3% of households subscribed to them. This puts Canada's wireless penetration rates behind many of the OECD-member countries.²³⁹ Despite low penetration rates in Canada, the mobile wireless sector, excluding paging, had revenues of approximately $15.9 billion in 2008, a 10.5% increase over the previous year. It also had approximately 22.1 million subscribers, representing a 9.0% increase over the previous year. On the other hand, Canada generally has competitive prices for local wireline services and a mature and reliable wireline network with a wireline penetration rate by household of approximately 91%; in 2008; these are some of many supporting arguments that explain why mobile penetration remains lower than that of other OECD-member countries.

Sector analysis

The combined local and long distance average revenue per minute (ARPM)²⁴⁰ in Canada was $0.11 per minute. This is among the lowest of all the OECD-member countries, which could be attributed to the high-volume minute plans that Canadian providers offered in 2008.

Wireless revenues, excluding paging, continued to increase from $9.3 billion in 2004 to $15.9 billion in 2008, representing an average annual growth rate of 14.3%. Similarly, there has been a continuous increase in the number of subscribers from 15.0 million in 2004 to 22.1 million in 2008, resulting in an average annual growth rate of 10.1%. Pricing plans that focused on certain markets, improved handsets, data services, and innovative service bundles all contributed to the mobile wireless growth in 2008. Since 2005, however, the rate of growth in terms of revenues and number of subscribers has been steadily declining. Revenue growth has declined from 16.5% in 2005 to 10.5% in 2008, whereas subscriber growth has declined more quickly from 13.3 to 9.0%.

The provinces that had the highest subscriber growth rate in 2008 were Alberta and Saskatchewan, where the number of subscribers grew at a faster pace than any other province. In terms of ARPU,²⁴¹ no province experienced a double-digit ARPU growth rate.

In 2004, the growth rate in wireless revenues was approximately 1.4 times that of the growth in the number of wireless subscribers. In 2007, this ratio increased to 1.8 times which resulted in the gradual increase in the monthly ARPU. However, in 2008, this ratio decreased to 1.2 times which may be an indication that ARPU growth rates are levelling off. The ARPU was $49 per month in 2004 and gradually increased to $59 per month in 2007, but only managed to increase by a dollar to $60 per month in 2008. This 2% increase in ARPU could be attributed to the overall increased use of voice and data services.

Similar to the previous year, the relative mix of the number of subscribers to prepaid and post-paid plans did not change significantly in 2008; however, the growth of basic voice and long distance revenues from prepaid plans was negative while post-paid plans increased 5.2% from the previous year.

A variety of different post paid plans and options give customers more choices and more services. Most WSPs targeted the post paid segment of the market in order to retain customers who were generally required to commit to the supplier for a fixed length of time, thus minimizing the churn rate.

One major highlight in 2008 was the completion of Industry Canada's AWS spectrum auction. The auction, which ended on 21 July 2008, generated over $4.26 billion. The AWS spectrum auction has paved the way for two or three potential new entrants in every major market and will provide Canadians with more choices as early as the second half of 2009.²⁴²

Capital intensity

Total wireless capital expenditures accounted for 24% of total telecommunications spending in 2008, while wireless revenues accounted for 40% of total telecommunications revenues. Average capital expenditure attributed to each mobile user (i.e. average capital expenditure per user (ACEPU)) had been steadily decreasing until 2004. However, in 2005 it started to increase as expenditure growth kept pace with revenue growth. A contributing factor for the increase in capital expenditures throughout this period was the increase in investments to build and provision next generation mobile networks and services. In 2008, ACEPU increased from $7 to $23 per subscriber due to the AWS spectrum auction. Excluding the AWS spectrum auction results, the ACEPU remained relatively flat in 2008.

Wholesale

Wireless wholesale revenues generally consisted of (a) roaming revenues a company received for processing calls from wireless subscribers of other companies roaming within its territory, and (b) revenues derived from the sale of wireless minutes to MVNOs. Wholesale revenues as a percent of total wireless revenues remained relatively small in 2008 at approximately 3%.

Churn rate

The implementation of national wireless number portability²⁴³ on 14 March 2006 has not had a significant impact on the churn rates²⁴⁴ of the top three wireless carriers. Their annual monthly average churn rates continued to be relatively low ranging between 1.5 and 1.6% in 2008.

Mobile coverage

The wireless footprint covers approximately 20% of Canada's geographic area. However, it encompasses approximately 99% of Canadians.

Mobile coverage did not expand significantly in 2008. However, the three major service providers have continued to upgrade their networks to third generation (3G)²⁴⁵ or 3G-equivalent capabilities to improve capacity, and to allow for faster data transmission speeds, and more reliable Internet connections. By the end of 2008, approximately 91% of Canadians were within the 3G wireless footprint.

The first wireless coverage map at the end of this section displays wireless coverage by number of facilities based WSPs. The second map displays the facilities-based providers' 3G or 3G-equivalent footprint across Canada. The term "facilities based provider" is used to refer to those providers who own and operate physical transmission facilities such as towers, transmitters/antennas, access trunks, switch centre/equipment, and other equipment and software required to offer mobile services.

Wireless - Statistical tables and charts

Table 5.5.1 Wireless and paging revenues and number of subscribers

											Growth	CAGR
	2004		2005		2006		2007		2008		2007-2008	2004-2008
Wireless revenues ($ millions)	9,348.8		10,895.5		12,600.1		14,430.0	#	15,940.3		10.5%	14.3%
Paging revenues  ($ millions)	130.3		121.0		96.1		92.8	#	96.1		3.5%	-7.3%
Total revenues	9,479.1		11,016.5		12,696.2		14,522.8	#	16,036.4		10.4%	14.0%
Wireless subscribers  (thousands)	15,020.0		17,016.6		18,749.1		20,277.4		22,092.5		9.0%	10.1%
Paging subscribers  (thousands)	751.0		616.7		504.6		390.4	#	319.3		-18.2%	-19.3%

Source: CRTC data collection

Figure 5.5.1 Wireless revenues, subscribers, and revenues per subscriber (excluding paging)

Figure 5.5.2 Wireless revenue and subscriber growth rates (excluding paging)

Table 5.5.2 Wireless and paging revenue components ($ millions)

											Growth	CAGR
	2004		2005		2006		2007		2008		2007-2008	2004-2008
Basic voice	7,214.4		8,172.1		9,110.1		10,117.0	#	10,481.9		3.6%	9.8%
Long distance	664.9		771.1		918.8		1,075.7		1,224.0		13.8%	16.5%
Paging	130.3		121.0		96.1		92.8	#	96.1		3.5%	-7.3%
Data and other	941.4		1,286.7		1,959.7		2,537.7	#	3,431.4		35.2%	38.2%
Terminal	528.1		665.6		611.4		699.5		803.0		14.8%	11.0%
Total	9,479.1		11,016.4		12,696.2		14,522.8	#	16,036.4		10.4%	14.0%

Source: CRTC data collection

Figure 5.5.3 Revenues by major component (excluding basic voice)

Table 5.5.3 Prepaid and post paid wireless revenues (basic voice and long distance) ($ millions)

									Growth
	2005		2006		2007		2008		2007-2008
Prepaid	661.6		738.9		934.6		912.9		-2.3%
Post-paid	8,244.3		9,235.2		10,211.0	#	10,745.7		5.2%
Total	8,905.9		9,974.1		11,145.6	#	11,658.6		4.6%

Source: CRTC data collection

Figure 5.5.4 Percent of prepaid and post paid subscribers

Figure 5.5.5 Capital expenditures (CAPEX) and average capital expenditure per user (ACEPU)

Note:

*2008 CAPEX includes an additional $4.6 billion due to the AWS auction.

Figure 5.5.6 Retail and wholesale revenue split

Figure 5.5.7 Wireless TSPs' subscriber market share²⁴⁶

Figure 5.5.8 Wireless TSPs' revenue market share²⁴⁷

Table 5.5.4 Wireless subscriber market share, by province²⁴⁸ (2008)

Province	Bell Group	TCC	Rogers	Other
British Columbia	13%	41%	43%	3%
Alberta	18%	53%	27%	3%
Saskatchewan	1%	3%	14%	82%
Manitoba	1%	12%	28%	59%
Ontario	28%	19%	48%	5%
Quebec	37%	23%	35%	5%
New Brunswick	64%	12%	21%	3%
Prince Edward Island	66%	13%	17%	3%
Nova Scotia	57%	17%	24%	3%
Newfoundland and Labrador	79%	16%	3%	2%
The North	n/a	n/a	n/a	n/a

Source: CRTC data collection

Note: n/a not available (Wireless subscriber market share data for the North was not derived due to insufficient data.)

Table 5.5.5 Average revenue per user (ARPU), by province (excluding paging)

Province	2005	2006	2007	2008
British Columbia	$53.84	$59.00	$59.10	$63.53
Alberta	$64.17	$70.07	$73.81	$75.26
Saskatchewan	$50.72	$52.74	$55.11	$57.66
Manitoba	$53.63	$54.01	$54.46	$57.05
Ontario	$51.83	$54.40	$59.63	$60.61
Quebec	$44.29	$47.52	$50.21	$50.45
New Brunswick	$47.77	$48.84	$52.87	$50.00
Prince Edward Island	$49.34	$61.10	$63.58	$64.89
Nova Scotia	$54.17	$50.42	$54.59	$52.57
Newfoundland and Labrador	$40.57	$45.37	$50.29	$47.43

Source: CRTC data collection

Table 5.5.6 Average monthly churn rates (percent)

	2004	2005	2006	2007	2008
Bell Mobility	1.3	1.6	1.6	1.7	1.6
Rogers	1.8	2.1	1.8	1.6	1.5
TCC	1.4	1.4	1.3	1.5	1.6

Note: Microcell was acquired by Rogers in 2004.
Source: Companies' annual reports and CRTC data collection

Figure 5.5.9 Population coverage and penetration

Map 5.5.1 Presence of wireless facilities-based service providers

Map 5.5.2 Presence of 3G or 3G-equivalent wireless facilities-based service provider