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Canadian wireless startups gaining ground; capturing one-third of all new subscribers

Recent figures and analyst calculations have revealed that Canadian wireless startups Wind Mobile, Public Mobile, and Moblicity are wrangling one-third of all new cellphone subscribers.

This fourth-quarter surge for these companies follows an evident splurge in seasonal advertising and marketing, where holiday-themed campaigns were rampant in this highly competitive market segment. Even more competitive due to the well-funded efforts by teleco king and queen Rogers Communications and BCE Inc., who launched discount brands of their own, to much competition controversy. Quoth The Globe and Mail:

On Friday, Mobilicity said it had already gained 50,000 wireless subscribers in the quarter. And in an interview with The Globe and Mail on Wednesday, Wind Mobile chairman Anthony Lacavera said he would be “well north of 200,000” subscribers by the end of the year. Dvai Ghose, an analyst at Canaccord Genuity who crunched the numbers, estimates that by the end of the current quarter Wind will have grown by 75,000 subscribers, Mobilicity by 70,000, [and] startup Public Mobile by 40,000.

“We’re seeing great take-up on data, absolutely fantastic take-up on data. That’s proving to be a real strength,” Mobilicity president and chief executive officer Dave Dobbin said of the company’s smart phone sales.

But new subscriber number don’t tell the whole story: many new subscribers are joining on majorly discounted promotions, thus eroding the startups’ profitability. Plus, they generally pay cheaper rates than customers on larger carriers—and analysts also expect them to be more likely to leave for another carrier because there are less contractual lockdowns and long-term incentives.

Bell, Rogers and Telus (T-T46.69-0.16-0.34%) are still expected to take the majority of the new subscribers – roughly 465,500, according to Mr. Ghose – but they are also focused on upgrading existing subscribers to smart phones, where they benefit from the added revenues generated by wireless data plans.

The incumbents’ reactions to new competitors have also sparked unwelcome government attention: The Competition Bureau labelled Rogers’ advertising “misleading” and launched a $10-million lawsuit against the carrier. And, after numerous complaints, Industry Canada has undertaken a departmental review of how big companies are mandated to share infrastructure with new entrants.

All said, analysts believe that a one-third market share for new entrants is impressive—after all, the Canadian sector is famous for having 95 per cent of customers on three oligopolist providers.

In 2014, another auction will sell more of the spectrum, allowing new startups to bud. But this is also when the current startups become available for buyout. Things will get interesting, to be certain.

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