Telus parries Shaw’s promo
Communications giants battle on broadband field
The broadband price war is finally heating up in Western Canada.
Telus Corp. responded last week to Shaw Communications Inc.’s incredibly good deal for ultra highspeed Internet with a killer promotion of its own.
Telus, the country’s third-largest telecommunications company, is offering a two-year contract for fibre Internet with upload and download speeds of 150 megabits a second and a data cap of 1 terabyte (1,000 gigabytes), for $47 a month for the first three months and $85 a month after. It closely matches Shaw’s offering for 150 Mbps speeds with 1 TB of data for $49.90 a month for the first year and $79.90 for the second year.
The move comes a month after Shaw launched its deal and follows a few months of heavy promotional intensity in Ontario, where BCE Inc. and Rogers Communications Inc. are duking it out for wireline customers that increasingly demand faster speeds and larger data caps to accommodate their increased use of video streaming services such as Netflix Inc.
But one analyst is questioning whether the steep discounts will ultimately hurt the bottom line for both companies vying for customers in the west.
“Neither player benefits in a price battle, and we view this development as a net negative for both players if the promotions spiral into a full-on price war,” Barclays analyst Phillip Huang wrote in a note to clients Monday.
Both the Telus and Shaw plans offer about six times the speed and exceptionally more data than major competitors’ plans available for the same price in Ontario.
While Shaw has a “significant” marketing advantage because it can offer fast speeds to a broader footprint with its existing infrastructure, Huang wrote that Telus has “the upper hand with this broadband battle.”
Telus’ strong wireless business can help it better finance a prolonged price battle and its “nascent” broadband market share is less susceptible to impact when the prices go back up, Huang added. It also doesn’t have to worry as much about cord cutters who give up television and opt solely for Internet in light of the better deal.
Investors are paying close attention to how quickly incumbent telephone companies Telus and Bell can roll out fibre-to-the-home service that rivals speeds provided by traditional cable companies Shaw and Rogers.
In Ontario, the competition between telcos and cablecos has resulted in longer periods of promotional pricing, often 24 months, for both bundled and stand-alone services, RBC Capital Markets analyst Drew McReynolds noted last week. It’s notable that companies are offering deals on just Internet — Bell and Rogers are charging under $70 per month for 50 Mbps and 100 Mbps plans respectively — instead of only offering discounts to customers that buy multiple services.