Due to increase in demand for wireless services and strong competition, the Canadian telecommunications industry is expected to grow at moderate pace in next four years.
The Conference Board of Canada revealed that due to an increase in demand for wireless services, the Canadian telecommunications industry is expected to grow at a moderate pace from 2009 to 2012. But due to increasing competition, profits are likely to be under pressure and business conditions are likely to be difficult, as reported by FinancialPost.
Furthermore, rise in competition is projected to be beneficial for consumers but it is going to restrict profit growth for the telecom companies in the country. In 2006 and 2007, the telecommunications sector recorded a double-digit profit growth but in 2008, it is likely to grow by 1.1% to nearly $6.8 Billion. Also, profits of the telecommunications sector are forecasted to remain constant in 2009 and will gradually grow from 2010 to 2012. The prices are likely to grow at around 1% through 2011.
The May 2008 spectrum auction for wireless services is considered as a major reason behind the expected growth in the telecommunications industry. The auction is projected to offer about 105 MHz of radio spectrum to provide mobile signals. This auction will provide entry to many new players in the market and due to increase in competition, the market will be unable to raise prices.
Moreover, the weak pricing power of the Canadian telecom industry and rising cost will fall on telecom companies and it will affect their profits. For instance, rate of wages is increasing due to shortage of qualified people in the IT sector. The rapid growth in the telecom industry is attracting many telecom players, resulting in intense competition.
The number of wireline phone subscribers is continuously declining but an increase in demand for wireless services is likely to maintain the level of overall growth of the industry. The emergence of various new technologies such as 3G, 4G and WiMAX are supporting the Canadian wireless industry by attracting more young consumers.
According to a Research Analyst at RNCOS, “The pressure of increasing competition is likely to restrict the abilities of telecom players to hike price. But by controlling labor cost and deploying new technologies, the players will be able to fight against the heating competition.”
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