Canadian Cell Phone Providers Uncompetitive

Investing

Walk into Bell, Telus and Rogers and the prices just hit you. Why should we pay $699 (no contract) for a Blackberry Storm? Well, I called Bell today and asked that question. The ‘customer care’ rep had no answer.

Hold on, Blackberry’s are made in Canada and we pay more to hold one than our friends to the South? But, don’t blame it on RIM, blame it on our fat, overweight, greedy cell providers… oh and the government – but that’s a different story.

Financial Post has done some recent digging and it can be safely said, the telecom industry in this country is at an appalling state. “Canada’s wireless industry is one of the weakest in the developed world”. And thats not even the kicker. Merrill Lynch ranks current Canadian wireless penetration at 65% – just ahead of Indonesia and Iraq. Just ahead of Indonesia and Iraq? Wow.

So, what this means it that we’re getting screwed. Among developed nations Canada ranks dead last in penetration, meaning that competition is extremely low in this country. And we pay a higher price because of this fact.

So what does this mean for Bell, Telus and Rogers stocks? Well, for now they are riding high but at the same time shaking in their boots. Why? Because a group of new wireless providers are ready to crash their party.

Soon you’ll be seeing ads for Globealive, Shaw, Quebecor selling phones to you. Take a peak at Globealive’s Wind Mobile website – they actually want to treat us as PARTNERS, not lowly, desperate customers.rim-blackberry-bold.

In 2008, Canada held a spectrum auction, meaning the federal Government put wireless space up for sale. So, companies jumped on the opportunity, bid on wireless regions in Canada, some coming out as nation- wide wireless providers and others not.

I have a long term sell on Bell, Telus and Rogers. At the moment they’ll suck as much money out of us until the party ends. Wireless Intelligence indicated that as of the end of Q1 2009, profit margins for Canadian wireless providers were amongst the highest in the developed world – about 44%. Theres no stopping them from selling us $699 Blackberry’s… until the new kids in town arrive. Look forward to healthy competition, lower prices, better phones in the near future.

Analysts will put an axe through Rogers, Telus and Bell, once profit margins on wireless divisions are squeezed due to increased competition. But analysts aside, we – consumers – will determine the fall of these behemoths.

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