Startup Struggles: Viability and Sustainability of Canada’s Discount Wireless Carriers in Question

It’s been more than a couple of years now that the new entrants such as Wind Mobile and Public Mobile have been competing for Canadians’ business in the wireless space. But after all this time, the combined market share of the discount wireless carriers is a paltry 3.4%. The infamous Big Three of Rogers, Telus, and Bell still control at least 92% of the market in Canada. So what’s up?

Moody’s, for one, questions the progress Canada’s wireless industry has made as a result of these new companies and their competitive offerings. “We question whether the new entrants … are viable and whether their impact on the market will be sustainable,” said vice president Bill Wolfe in a report.

Further, the startups may not be operating profitable business models. While the incumbent carriers generate about $60 per revenue per month from their consumers, the startups generate an average of only half that, and profit margins – while specifically unknown – are likely significantly lower. Indeed, Moody’s suggests that some or all of the discount carriers may be losing money.

Moody’s believes that this may be why the Canadian government recently loosened restrictions on foreign ownership of Canadian telecommunications companies, and why Ottawa decided to reserve 25% of the spectrum in the upcoming auction for the new entrants. While these moves will take a long time to materialize, Moody’s affirms that the Canadian wireless market is still poised to become a more competitive environment in the coming years.

Photo: Mark Blinch, Reuters

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