Wind Mobile, fresh off launching service in Edmonton this week, is cranking up the heat on established cellphone providers by offering customers credit to break their contracts.
Wind on Friday said it would offer new customers $150 — distributed over five months in $30 instalments — if they cancel an existing contract with Bell, Rogers, Telus or any of those companies' discount brands.
Chris Robbins, the company's chief customer officer, said the deal is intended to help offset the often hefty early-cancellation fees (ECF) charged by other carriers.
"My preference would be that the whole concept of ECF in the market would be eliminated by the government or the industry as being patently unfair to customers," he wrote on the Wind blog.
"However, I don’t see that change happening any time soon, so we’ve decided to launch an offer with some help for customers looking to pay off their ECF with the incumbents."
Wind said it will offer the deal until the end of March. The company is also offering one month of free service.
Bell, Rogers and Telus all sell phones to customers at a discount in exchange for a multi-year contract. They also sell some devices at full cost without contracts, which is the model Wind has adopted exclusively.
Industry analysts said the offer may signal a shift in strategy for Wind. The company, which launched service in Toronto and Calgary in December, has so far offered higher-value plans at price points that haven't threatened the big three. This new offer specifically targets Bell, Rogers and Telus customers, they said.
"If the first-month-free option stands, it means they are giving the equivalent of four to five months free," said National Bank Financial analyst Greg MacDonald, referring to the ECF credits. "Yes, this seems aggressive."
Iain Grant, president of the SeaBoard Group telecommunications consultancy, said the move is a necessary one for Wind, given that very few existing cellphone customers are not on a contract.
"Given that [about] 80 per cent of wireless Canadians have a contract, and given that those contracts are two to three years, it would follow that only [around] one-third would be 'available' in any given year," he said. "It does boost cost of [customer] acquisition, but it captures the moral high ground and that should play well with the disaffected wireless masses."
Wind's move could also be risky in that the company doesn't offer contracts itself. Customers could use Wind to help get out of their existing contracts, then switch to another new provider such as Mobilicity, which is launching service in the spring, Grant added.
The offer could also spur legal complexities, according to competition lawyer John Clifford at McMillan. If enough customers left one provider for Wind, it wouldn't be surprising to see the original company claim that Wind was inducing people to break their contracts.
Such claims may not hold much weight, though, given that cellphone contracts usually spell out exact terms for breaking a contract, he added.
"The reality is that most cellphone user contracts do provide a mechanism to allow a consumer to get out of a contract and pay a penalty," he said. "All Wind is doing here is helping someone to do that."