Do homework on wireless packages
Some promotions end up costing clients more than they expected
Consumers eyeing a new smartphone should sign up before Labour Day as promotional intensity heats up between wireless providers.
Every year, the back-to-school period rivals the December holidays as the busiest time for wireless providers given typical retail behaviour, but with the additional layer of traffic from new product launches and hype surrounding the latest devices.
This year is no exception, with the Big Three incumbents BCE Inc., Rogers Communications Inc. and Telus Corp. and smaller players Shaw Communications Inc.’s Freedom Mobile and Quebecor Inc.’s Videotron rolling out new price points and offerings daily in a bid to attract subscribers already primed to spend money.
What’s different are promotions that focus more on heavily subsidized phones — a tactic that pushes monthly wireless bills higher and drives the important industry metric of average revenue per user, although at the expense of higher acquisition costs.
“The one biggest difference in the market this year versus last year is we’ve made it more affordable for people to get the phones they want,” Claire Gillies, vicepresident of marketing at Bell, said in an interview about promotional strategies during the busy season.
“Customers get to pay less up front for their device and they pay a little bit more over time. That type of activity obviously stimulates the market because you reduce barrier to getting the device.”
The Big Three all offer varying tiers of upfront subsidies that affect the final monthly price on twoyear contracts.
A Rogers spokesperson also noted the “terrific offers” on some of the best devices, with more than a dozen deals, followed by mentions of data buckets and value-added services.
After the upfront cost of a phone drops to $0 — both the best-in-class Samsung Galaxy S8 and iPhone 7 have dropped to this level — Gillies said the market shifts into data promotions, which become part of the ongoing price.
“It’s all about data. That’s what users want,” she said.
Indeed, data was at the centre of the most attention-grabbing deal in this period thus far — Freedom’s one-day offer of 10 gigabytes of data for $40 per month to customers switching from Telus or its flanker brands. It typically offers 4 GB of data for that price. On the incumbents’ networks, 10 GB goes for about three times the price.
In an emailed statement attributed to Shaw’s vice-president of external affairs Chethan Lakshman, Shaw noted its pricing model aims for low-cost value plans and that it is investing in an improved LTE network.
“This is a competitive industry at a very competitive time in the annual cycle with all players trying to get an edge. The plans and offers Freedom Mobile puts in the marketplace demonstrate we are going to compete vigorously.”
Desjardins analyst Maher Yaghi called the offer “disruptive,” noting to clients it is a typical strategy for providers with small customer bases. Freedom has about one-million customers in a market with more than 30-million subscriptions.
“This aggressive behaviour is not surprising since Freedom’s wireless offering is not yet at the level of the incumbents’, and the company must therefore make itself attractive to customers by competing on price,” Yaghi wrote.
He believes Freedom will continue to offer low prices until it significantly increases its market share.
“In the overall market, we do not expect monthly wireless prices to decrease, but data allowances are likely to grow, in our view, due to the decreasing cost of delivering data wirelessly.”
RBC Capital Markets analyst Drew McReynolds also noted that promotional intensity “remains constructive” even as it picks up for both main and flanker brands. While Freedom is jostling with flanker brands, he views it as balancing subscriber growth and revenue.
For consumers, it can feel impossible to sift through the thousands of wireless options available when considering different devices, subsidy tiers, shared plans, data buckets and other extras — especially when prices tend to move in step between carriers. (For instance, Bell was selling the iPhone 7 Plus for $100 less on Thursday than it was on Wednesday. Its price point now matches its rivals.)
Bell’s Gillies said daily price adjustments at this time of year reflect the level of competition in the industry, which has faced criticism from consumer groups and the Competition Bureau over higher prices in provinces without a regional competitor.
“The promotional intensity, the pricing intensity and the competitiveness of this industry never surprises me,” she said. “It continues to be very, very vibrant.”