Larger data buckets prompting slowdown in billings growth for wireless players
TORONTO Canada’s Big Three wireless companies are increasingly offering larger amounts of data without commensurate price hikes — and it’s starting to show in their financial results.
The average amount each subscriber pays monthly, a key performance indicator for the wireless industry, has risen over the past few years as demand for data skyrocketed. Either people willingly spent extra for higher data allotments or begrudgingly paid overage fees if they exceeded their data limits.
But average billings per user aren’t growing as fast as they used to. In the latest quarter, Telus Corp. reported flat billings growth compared to the same period last year and BCE Inc.’s average billings dipped 0.7 per cent. Rogers Communications Inc. came out ahead with average billings per user up 3.8 per cent, although that is a slight dip from 4.5 per cent and 4.3 per cent growth in the first and second quarters, respectively.
Bigger data buckets at lower prices gained traction one year ago when Shaw Communications Inc. launched 10 gigabyte plans for $60 per month, an unprecedented deal (albeit on a less mature network). The incumbents responded with the same offer over the holidays, sparking a flurry of action that shifted customers’ expectations of what they should pay for data.
Should this trend continue — and analysts expect it will — the industry will need to rely more on subscriber volumes to deliver the growth investors have come to expect.
Executives have attributed the tempered average billings to competition leading to larger data buckets. In turn, fewer customers are getting dinged with overage fees, monthly annoyances that, in 2016, added up to more than $1 billion in revenue across the industry.
On a Thursday conference call with analysts, Telus chief executive Darren Entwistle said the trend reflects competitive pressures driving larger data allotments. He also pointed to data usage notifications, a consumer-friendly tool that has been widely adopted across the industry to warn people when their data is almost gone, as a reason for the decline.
“These factors are being offset by continued robust customer growth and increased data usage,” Entwistle said.
“While the general trend toward moderated ABPU growth compared to what we’ve seen in past quarters is as anticipated and forecasted, we are working diligently to better monetize robust data growth while simultaneously delivering a strong value for money proposition for our customers.”
RBC Capital Markets analyst Drew McReynolds noted to clients that flat billings growth was “better than feared” given the “well-telegraphed slowdown.”
Desjardins Maher Yaghi said that billings growth has been an important driver for wireless revenue over the last few years.
“Now that all three incumbents have reported, we also highlight that the decline in industry ABPU growth was once again faster than the street’s expectations,” he said.
But Telus’s chief financial offer Doug French said the bigger focus is on overall market growth. The Big Three all added over 100,000 wireless subscribers on contract in the quarter, with Telus reporting an additional 109,000 subscribers.
“The market is still growing, and growing a lot,” French said in an interview.
Another factor is the prepaid market, which Rogers dominated for years and Bell and Telus chased higher-value customers. But Telus and Bell are both paying more attention to these low-cost plans, a move that could slightly dampen growth in their average billings if they add more entry-level customers.
French said Telus realized a year ago that it had neglected that demographic.
“There’s a market there, there’s a need there,” he said. “We realized it’s a good opportunity to get market share.”
Plus, there’s an opportunity to eventually move these customers to higher-cost plans — an effective way to boost average billings.