Freedom Mobile faces uphill battle to compete with Big 3, industry experts say
Restricted launch may hinder former Wind Mobile against Rogers, Telus and Bell
The company formerly known as Wind Mobile starts rolling out its new high-speed wireless network in Toronto and Vancouver on Sunday, as part of an incremental effort to better compete with the country's Big 3 wireless providers.
But some industry watchers say the rebranded Freedom Mobile, which was acquired by Shaw (TSX:SJR.B) in a deal that closed in March, is unlikely to make a big difference immediately.
In theory, Freedom's beefed-up LTE network, an upgrade from its third-generation platform, should increase competition, said Marc-David L. Seidel, a professor at the University of British Columbia's Sauder School of Business.
'It's not going to be an incredibly strong force'
But its restricted launch isn't a competitive entrance, he said. The service won't start expanding to the Greater Toronto and Vancouver areas until next spring, and to Calgary, Edmonton and Ottawa next summer. Parts of southern Ontario, including Hamilton and Kingston, will join as of fall 2017.
As a result, Freedom will have difficulty attracting new users with its "very limited footprint in Toronto and Vancouver," Seidel said.
"So it's not going to be an incredibly strong force on the LTE side."
Another major hitch, he added, is that the company's network coverage isn't as robust as that of the Big 3 telecommunications companies, Rogers, Telus and Bell. It's also weaker than these rivals' flanker brands, the less expensive Fido, Koodo and Virgin, respectively.
Freedom CEO Alek Krstajic said that while the company's coverage may be spottier, it offers a better experience because their network is less crowded. He likens it to driving on an empty highway and expects that to be the case for the next year or two, until about one million customers rely on the network.
Krstajic also said he anticipates that coverage will improve after it acquires more spectrum at the next government auction.
Barclays analyst Phillip Huang, however, wrote in a note that using the Freedom brand rather than the Shaw name suggests its network quality is not likely to close the gap "for some time."
New hardware requirements may be another impediment to Freedom's price-sensitive customers considering an upgrade to its new high-speed network, said Seidel.
Existing customers will need one of two smartphones to able to access it, and they'll likely have to pay a higher price point than with their current 3G plans.
The regular price to access the LTE network is $45 per month, which Seidel said could further discourage customers.
He said Freedom will need to change its pricing strategy to concern its competitors.
'Can they pull it off? Who knows?'
Krstajic said the company doesn't plan to discount heavily, as it needs to be patient about gaining market share rather than offering unfeasibly low prices in order to become a sustainable fourth player.
Still, he noted, Freedom's LTE plan is at a significant discount to those offered by competitors when features like the amount of data offered are taken into account.
Freedom is advertising a special offer of 6 GB for $40 a month for the first year. Meanwhile, 5 GB of data at the Big 3's flanker brands would cost nearly $100 for the least expensive option.
The company's LTE plan price could drive its competitors to lower their prices, at least for prospective customers, said Fred Lazar, an associate professor of economics at York University's Schulich School of Business in Toronto.
He believes Shaw is well positioned to become a fourth major player in the markets it services as it's bound to attract individual customers, as well as small and mid-size businesses looking for less expensive, high-speed plans.
"Can they pull it off? Who knows?" he said.