Communications Monitoring Report 2019

Retail Mobile Sector

The retail mobile market remained the largest telecommunications market sector, with revenues of $27.1 billion in 2018, a growth of $2.63 billion (10.7%), over 2017 revenues. These revenues represented over 55% of all retail telecommunications revenues in 2018. The sector was one of two telecommunications retail sectors, the other being fixed Internet, that reported revenue growth in 2018 – all other sectors reported declines. In 2018, subscribers increased by 4.8% over the prior year to 33.2 million, and average revenue per user (ARPU) increased by 6.6% to $69.61. Earnings before interest, taxes, depreciation and amortization (EBITDA) margins reached 41.0% in 2018.

Mobile networks covered approximately one fifth of Canada’s geographic land mass and reached 99% of Canadians in 2018, while the penetration rate reached 89.2%. Advanced wireless networks such as Long-Term Evolution (LTE) and LTE-Advanced (LTE-A) which deliver even higher speeds than previous-generation networks, were available to approximately 99% and 95% of Canadians, respectively. At the end of 2018, LTE networks covered 87% of Canada’s major roads and highways,^{Footnote 1} leaving almost approximately 14,700 kilometres without LTE coverage.

Over the past decade, some progress has been made in fostering a more competitive mobile industry through of a combination regulatory initiatives including

the auctions of licences for advanced wireless services (AWS) in the AWS-3 bands (1755-1780 megahertz [MHz] and 2155-2180 MHz);
the auctions of licences in the 700 MHz, 2500 MHz, and 2300 MHz bands as well as the personal communications services (PCS)-G block (1865-1870 MHz and 1945-1950 MHz); and
additional AWS-3 spectrum auctions (1755-1780 and 2155-2180 MHz)
other government initiatives, such as the introduction of mandatory roaming and tower sharing, wholesale roaming rate regulation and the Wireless Code (which took effect in 2013 and was subsequently reviewed in 2017).

During this same period, Canadians’ mobile usage and options evolved. New service providers entered the market, and Canadians now have more choices than ever before. For example, Canadians can now choose alternative pricing and promotional offerings, unlimited provincial and nationwide long-distance services, unlimited national and international texting services, and faster mobile networks.

To measure the level of competitiveness in this sector, the retail mobile sector analysis presents data segmented between Bell Group, Rogers and TELUS (referred to hereafter as Top 3),^{Footnote 2} the Top 3’s flanker brands^{Footnote 3} and other service providers (referred to hereafter as other providers).^{Footnote 4}

Throughout this section, the Top 3’s flanker brands are a subset of the Top 3.

i. Revenues

Infographic 10.2 Highlights of the retail mobile revenues, 2018

Revenues in the mobile service sector continued to account for the largest portion of telecommunications sector revenues, totalling $27.1 billion in 2018. Compared to the previous year, this was an increase of 10.7% above the five-year cumulative average growth rate of 6.7%. The Top 3 captured 91% of these revenues, leaving 9% to be divided among the remaining providers. Although the Top 3 lost about 1% in total revenue market share from 2014 to 2018, they were still able to retain about 91% through internal growth and acquisitions. High-level market share data for 2014 to 2018 can be found on open data.

The strong revenue growth reported in 2018 was a direct result of the implementation of new international financial reporting standards (IFRS)^{Footnote 5} that changed the way in which providers recognized mobile revenues derived from contracts with customers. This change in reporting resulted in terminal equipment revenues growing from $1.9 billion in 2017 to $7.0 billion in 2018, an increase of 267.2%. The year-over-year impacts of these reporting changes between 2017 and 2018, can be seen found in Figure 10.1 on open data.

Revenues from mobile data services have been one of the main drivers for sustained and strong revenue growth in this sector; in 2018, however, mobile data revenues recorded a loss of 8.2% for the first time ever. Mobile voice revenues continued to fall at a rapid pace. Overall, basic voice and long distance combined, revenues have decreased by 15.8% in 2018 and, on average, by 3.8% annually over the five-year period from 2014 to 2018.

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Source: CRTC data collection

Since the majority of mobile data service revenues were derived from postpaid subscribers, companies continued to promote larger data buckets to attract new customers and acquire existing users from their competitors.

Various mobile and paging service revenue components for the 2014 to 2018 period can be accessed on open data.

Infographic 10.3 Retail mobile revenues composition by type of plan, 2018

In 2018, 89% of mobile services revenues were derived from customers who subscribed to voice and data plans; this serves as a proxy to compare the levels of smartphone and regular cell phone adoption, as well as evidence of increased demand for data services. Those with voice-only plans generally own regular cell phones, which are mainly used for voice services and have limited data capabilities. Use of these phones may indicate a segment of society that is either less inclined to embrace the digital economy or has yet to do so.

Infographic 10.4 Retail mobile roaming revenues, 2018

Roaming^{Footnote 6} revenues, which represent approximately 4% of total retail mobile revenues, were largely generated from subscribers who used mobile services in the United States. Approximately 74% of voice roaming revenues and 55% of data roaming revenues were derived from users roaming in the United States, with very few revenues generated from within Canada. Short Message Service (SMS) and Multimedia Messaging Service (MMS) revenues were excluded from the data revenue component of this figure.

Competitive lens/landscape

Infographic 10.5 Retail mobile revenues market share of Top 3 vs other service providers, 2018

Long description

	Top 3	Top 3’s flanker brands	Other providers
Revenue market share	90.7%	21.4%	9.3%
Revenue growth rates	9.4%	13.2%	24.5%
Revenues generated from postpaid plans	97.1%	Not available	90.7%

Source: CRTC data collection

The Top 3 market their mobile services through primary and flanker brands. By marketing their services through various market segments, they are able to differentiate their service offerings. Generally, the Top 3’s flanker brands and the new entrants have targeted the more value- and price-conscious consumers. Isolating the Top 3’s flanker brands and comparing their data to that of the other providers’ may provide a better comparison of the two groups’ abilities to compete for revenue market share.

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Source: CRTC data collection

In 2017, MTS Inc. figures were included within the Bell Group due to Bell Mobility’s acquisition of MTS during the first quarter of 2017.

The market shares of the Top 3 (Bell Group, Rogers and TELUS) include the shares of their flankers.

As seen in Figure 10.3 below, all groups of competitors reported solid revenue growth rates in 2018 with the other providers reporting an exceptional growth rate of 24.5% in 2018, a sharp reversal from the negative 6.5% rate that they reported in 2017. Overall, the strong revenue growth for this sector can be attributed to the new reporting standards and to the increasing rate of subscriptions for mobile services.

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Source: CRTC data collection

In 2017, MTS Inc. figures were included within the Bell Group due to Bell Mobility’s acquisition of MTS during the first quarter of 2017.

In 2018, approximately 95% of mobile revenues were derived from postpaid plans and almost all data plans were postpaid. As data revenues continue to be most lucrative service component, there is a strong incentive for providers to compete for postpaid subscribers because of higher revenues per subscriber and lower churn rates. Figure 10.4 compares the percentage of revenues derived from certain postpaid retail mobile services (basic voice, long distance, and data only) by both the Top 3 and other providers.

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Source: CRTC data collection

ii. Subscriber data

Infographic 10.6 Characteristics of retail mobile subscriptions, 2018

In 2018, mobile subscribers grew by 4.8% to reach 33.2 million subscribers. This growth rate was more than two times slower than the revenue growth rate of 10.7%, indicating greater revenues per subscriber for 2018.

At the national level, the Top 3 continued to hold the majority (89.2%) of the subscriber market share, while their competitors divided the remainder (10.8%); however, there were regional differences. The Top 3’s market share varied among the provinces and territories. Collectively, they held the majority share in all territories as well as in all provinces except for Saskatchewan, where the other service providers held 60% of the market share (a decrease from the 66% they held in 2014). Provincial and territorial market share data can be found on open data.

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Source: CRTC data collection

The figure above displays the market shares held by the major wireless service providers (WSPs), excluding Freedom Mobile and Eastlink/Bragg, in Canada’s provinces and in the North (Northwest Territories, Nunavut and Yukon). Other providers include (but are not limited to) SaskTel, TBayTel and Videotron.

In 2018, approximately 40% of all subscribers who subscribed to a data plan resided in Ontario. This figure closely aligns with the population distribution by province. Additional information with respect to the number of subscribers with a data plan and the distribution of data subscribers in each region of the country can be found on open data.

The appetite for mobile data services continued to grow in 2018. Approximately 40% of data subscribers had a plan with 5 or more gigabytes (GB) of data, while 64% of all subscribers had unlimited voice minutes and 96% had unlimited text messages. In comparison, these figures were 31%, 57% and 99%, respectively, in 2017.

Following the implementation of the Wireless Code in 2013, the percentage of postpaid plans under contracts of more than two years’ duration declined significantly, decreasing from 33.4% in 2014 to 7.2% in 2017. In 2018, however, this figure increased to 8.3%. Since business accounts were exempt from the Wireless Code, many of the accounts reported to have contracts exceeding two years’ duration reflect business accounts that were still under contract. The number of subscribers with one- to two-year contract terms remained unchanged at 49% both in 2017 and 2018. Additional details can be found via open data.

Due to the reporting requirements for each reporting group, only those companies that provided the data were included in the subscribers with a data plan statistics. Consequently, Figure 10.6 represents over 90% of total mobile subscribers. It illustrates the percent of subscribers with a data plan as well as the increasing appetite for data plans, subscriptions for which have steadily increased from 67% in 2014 to 85.3% in 2018. Figure 10.7 shows the distribution of data plan subscribers (excluding data-only plans) by plan size.

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Source: CRTC data collection

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Source: CRTC data collection

Competitive lens/landscape

Infographic 10.7 Retail mobile subscribers market share of Top 3 vs Top 3’s flanker brands vs other service providers, 2018

Long description

	Top 3	Top 3’s flanker brands	Other providers	All providers
Subscriber growth rates	3.8%	5.7%	14.9%	4.8%
Mobile subscriber market share	89.2%	27.2%	10.8%	100%
Subscribers with postpaid plans	88.8%	Not available	86.7%	88.5%
Subscribers with data plans	85.0%	Not available	91.7%	85.3%
Data subscribers whose plans included 5 GB or more of data	36.5%	Not available	59.1%	39.5%

Source: CRTC data collection

The other providers’ subscriber growth outpaced that of the Top 3. As a collective group, the other providers reported a 14.9% increase in subscribers in 2018, their highest reported growth rate in the past four years. As for data subscribers whose plans included 5 GB or more of data, the Top 3 reported an increase from 28.1% of such subscribers in 2017 to 36.5% in 2018; however, the other providers reported an increase of only 3% during this same period.

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Source: CRTC data collection

From 2015 to 2018, the Top 3’s subscriber market share did not change significantly. However, a comparison between the Top 3’s flanker brands and the other service providers offers insight into how the Top 3 have marketed, packaged and positioned their flanker brands to compete in the marketplace. From 2015 to 2018, the Top 3’s flanker brands held approximately one quarter of the subscriber market share, between double and triple that held by the other providers.

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Source: CRTC data collection

The market shares of the Top 3 include the shares of their flankers.

Both the Top 3 and the other providers have consistently and successfully positioned their plans to encourage their customers to favour postpaid subscriptions over prepaid ones. Consequently, the percentage of postpaid subscribers increased to 88.5% in 2018, compared to 85.5% in 2014. The shift from prepaid to postpaid subscriptions resulted in higher overall revenues and higher revenues per subscriber.

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Source: CRTC data collection

The figure below compares the distribution of data plan subscribers (excluding data-only plans), by plan size and by whether they have subscribed to plans offered by the Top 3 or by other providers.

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Source: CRTC data collection

iii. Other performance indicators

In addition to revenue and subscriber metrics, there are other indicators such as ARPU,^{Footnote 7} data usage, investments^{Footnote 8} and penetration rates that can help measure financial performance and assess the level of competition in the mobile sector.

Infographic 10.8 Highlights of retail mobile financial performance, 2018

Average capital expenditure per user (ACEPU) was computed by using only data from companies who supplied both capital expenditure and subscriber data, excluding spectrum expenditures. An end-of-year subscriber figure was used in the computation rather than an average number of subscribers during the year.

The increase in data demand and usage from 2014 to 2018 vastly outpaced the revenues derived from data service, which resulted in lower revenues per GB per month. The average revenue per 1 GB of data usage per month has been declining since this metric was first reported in 2015. Only companies that provided both data traffic and revenues were included in the calculation.

ARPU is a useful measure of the revenues that mobile providers receive per subscriber. Conversely, from a consumer perspective, it is a measure of consumers’ expenditures on wireless services. From 2014 to 2018, the national ARPU increased from $61.03 to $69.61 per month, an average increase of 3.3% per year. Provincial and territorial ARPU data for these years can be accessed on open data.

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Source: CRTC data collection

EBITDA^{Footnote 11} margins, a proxy for measuring the operating profitability of the mobile sector, were calculated for 2014 to 2018 and presented in the figure below. While not all companies generated such high margins, the Top 3’s EBITDA figures were heavily weighted in the calculation due to their 91% revenue market share in the mobile sector.

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Source: CRTC data collection

Investments in infrastructure are necessary for mobile providers to expand their network coverage, offer higher broadband speeds and create network efficiencies. Total wireless capital expenditures can be found in the Telecommunications Overview section or can be accessed on open data. The chart below displays the average monthly capital investments associated with each mobile subscriber for each year from 2014 to 2018.

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Source: CRTC data collection

In 2018, Canadians consumed more mobile data, evidenced by the averages for data use per subscriber, shown in Figure 10.15. The average monthly data usage for all subscribers and subscribers with a data plan was 2,128 MB per month and 2,525 MB per month, respectively.

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Source: CRTC data collection

The average churn rate is a measure of subscriber turnover. A high churn rate suggests that customers are leaving their existing mobile providers for a number of reasons, including dissatisfaction with the service, pricing issues or a desire to take advantage of competitive offers. Conversely, low churn rates suggest that Canadians are not switching providers, which could indicate either that customers see value in remaining with their current provider or that there is a lack of incentives motivating subscribers to change from one provider to another.

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Source: CRTC data collection

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Source: CRTC data collection

SMS/MMS allows for the transmission of text, pictures, videos, and other media between mobile subscribers. Each year from 2014 to 2018, the average number of messages sent and received was consistently above 500 million messages per day (an average of 514 million per day). Additional details can be found on open data.

Smartphones, tablets and other mobile devices that provide access to the Internet are continually increasing demand for wireless capacity. The following tables and charts illustrate how Canadians are adapting to a digital communication system.

Figure 10.18 shows the percentages of Canadians, 18 years of age and older, who owned regular cell phones, smartphones, and tablets, from 2014 to 2018. In this figure, smartphones are a subset of cell phones. The use of smartphones and tablets increases the volume of network data traffic.

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