Canadian cellphone carriers are grinding out profits.

Exactly how profitable are Canada's cellphone carriers? The short answer: very. The longer answer: They are the most profitable in the developed world.

The Canadian wireless market, of which more than 95 per cent belongs to Rogers Communications Inc., Bell Canada Inc. and Telus Corp., was the most profitable of 23 developed countries surveyed in a recent report by Merrill Lynch.

In the investment bank's Global Wireless Matrix, released in April, Canada's top three carriers had a combined profit margin of 45.9 per cent, well above the developed world's average of 33.1 per cent. The next closest country was Italy, where carriers averaged a 41 per cent profit margin. U.S. cellphone companies' mean margin was 32.1 per cent.

Rogers, Bell and Telus arrived at the high profit margins by bringing in correspondingly lofty revenue from customers. In the wireless industry's key measure of monthly average revenue per user, or ARPU, Canadian carriers came in not just second-highest among developed countries, but second-highest in the world. Of the total of 53 developed and emerging countries tracked by Merrill Lynch, Canadian carriers' monthly ARPU of $60.83 US was second only to Ireland's $62.97 US. Among developed nations, the average ARPU was $44.24 US.

Further broken down, Canadian wireless companies individually pulled in some of the highest ARPU in the world, with Telus leading the way. According to a global study of more than 240 wireless companies by Washington-based tracking firm TeleGeography, Telus had the eighth-highest ARPU in the fourth quarter of 2007, at $59.30 US. Three other Canadian wireless companies ranked in the Top 20 — Rogers came in 14th with $55 US, MTS Allstream placed 15th with $54.90 US and Bell Aliant was 18th with $54.10 US. Bell came in 26th with an ARPU of $51.20 US. TeleGeography uses a different measure than Merrill Lynch to arrive at its figures.

Marc Choma, spokesman for the Canadian Wireless Telecommunications Association, the industry's lobby group, said international revenue comparisons are not entirely fair because many subscribers in Europe have more than one cellphone account. That means the ARPU of European carriers is artificially lower because some customers are dividing their monthly spending between at least two providers.

Canadian carriers ranked very well in the cost of voice calls in the Merrill Lynch study. At an average cost of 11 cents US per minute, voice calls were cheaper in Canada than in all but two developed nations - Singapore and the United States. Canadians also racked up 439 average monthly minutes of use, which was more than almost anywhere else in the world. Only Singaporeans and Americans, who nearly doubled Canadians' talk time with 812 minutes, talked more, on average.

However, by the CWTA's reasoning, talk times in Europe were likely artificially lower because customers' total monthly minutes were spread between several carriers.

Voice calls made up the lion's share of Canadian carriers' ARPU, indicating that customers here were still reluctant to use data services. Among developed nations, Canada ranked second-last in how much ARPU came from non-voice services, at 12.5 per cent. Only Greek carriers pulled in a lower percentage of their revenue from data services such as text messaging, e-mail and internet surfing, with 12.2 per cent.

Choma also said ARPU does not necessarily reflect the price consumers have to pay to subscribe to cellphone services because it is now harder to split the base monthly cost for voice calls from optional charges for data usage.

"As data consumption and spending has increased, that relationship has become much more complicated," he said. "Consider that if an average subscriber who spends $58.44 buys one additional ring tone [for $3.50], the ARPU increases by six per cent."

Merrill Lynch said much of the wireless competition in Canada has been taking place in the mid-market and corporate segment, and pricing has not been very attractive to entry-level customers.

"It is still difficult to get postpaid service for much less than $40 a month, including fees and taxes, other than via a family plan," the report said. "We are seeing some movement here now (e.g. with new postpaid plans from Virgin Mobile), and we expect further changes when new competitors enter the market next year."

Away from wireless, Canada's big telecommunications firms weren't nearly as profitable, with the exception of Bell. In an April study by Forbes magazine of the overall businesses of the 67 largest telecommunications companies in the world, Bell ranked ninth with a profit margin of 22.7 per cent. Telus and Rogers, the only other two Canadian companies to qualify for Forbes' list, ranked in the lower half at 38th with a margin of 13.8 per cent and 54th with 6.2 per cent, respectively.

The most profitable telecommunications company in the world was Telecom New Zealand, with a margin of 61.4 per cent.