Telecom price wars' absence bodes well for sector: TD report
The absence of price wars between Canada's telecommunications companies during the holidays will help drive improvements for the industry in 2021, TD Securities said in a report that lifted estimates for the sector.
“With promotional intensity in the wireless sector seemingly improving, and with increased optimism for a vaccine-led return to more normal consumer behaviour by mid-2021, we are increasing our estimates across the board,” TD Securities analyst Vince Valentini said in a Monday note to investors.
Holiday seasons typically bring high-intensity promotions, where wireless and mobile phone companies such as Rogers Communications Inc. and BCE Inc. offer discounts to entice as many customers as they can.
Such activity in 2020 was relatively muted compared with prior years, TD Securities said, a sign that revenue could stabilize and even increase in the coming months.
“We are yet to see device subsidies on the most recent line of iPhones,” Valentini said in a separate Monday note.
Canada's main telecom companies were offering device subsidies of about $20 to $100 on the newest iPhones during last year's Black Friday sales, he said.
Price wars could ramp up again for the Christmas and Boxing Day shopping season, according to Valentini, but he is “confident” in increasing estimates for average revenue per user due to the “promotional discipline” observed in the past two months.
This contrasts with the back-toschool season, which saw aggressive activity as pandemic lockdowns eased.
The return of roaming revenue, a critical source of income for the Canadian telecoms, to pre-pandemic levels is also in sight as progress on a COVID-19 vaccine accelerates.
There's an expectation that the travel sector will recover somewhat by the middle of next year, which could mean an increase in roaming, Valentini said.