Shaw deal to buy Wind Mobile could be a boon to wireless customers
$1.6B deal offers promise of more competition in cellular services
Canada's wireless market was shaken up this week by an offer from Shaw to buy Wind Mobile, a deal that could change the landscape in terms of what consumers will pay and get in their cellphone plans.
Calgary-based Shaw is snapping up Wind and its pool of just under a million cellphone customers for $1.6 billion. Wind, formed almost exactly six years ago, operates mainly in big cities in Alberta, B.C. and Ontario, offering prepaid and postpaid wireless services to about 940,000 customers.
That's a drop in the bucket compared with the so-called Big Three — Rogers, Bell and Telus — who together control more than 95 per cent of the market, with more than eight million wireless customers each.
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The deal, if approved by regulators, would allow Shaw' to move into that territory and form Canada's fourth national wireless carrier, something the federal government and consumer watchdogs have long said they are in favour of.
Canadians pay some of the highest prices in the world for cellular services, something critics have blamed on overly heavy-handed regulation and a lack of competition. Following a high-profile spectrum auction in 2009, Wind Mobile and other entrants like Mobilicity and Public Mobile aimed to shake up an industry that had long dissatisfied many Canadians.
In the intervening six years, however, Wind has eked out a tiny foothold in the industry, while other upstarts failed to even grab a toehold, with Public being swallowed up by Telus, and Rogers buying Mobilicity this past summer.
Linking up with Shaw, however, changes the game both for customers and the company itself. Calling the deal "transformational" for the company that bears his name, CEO Brad Shaw says he expects it to be finalized sometime in late 2016.
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So existing customers shouldn't expect any changes — either to their service, or to prices — before that.
But it's not hard to imagine what the future may look like. While the price tag seems steep for a company that was worth under $300 million a little over a year ago, one of the things that Shaw is buying for that money is a customer base. That's almost a million new customers that Shaw can try to sell its landline, cable and internet services to, a concept known as "bundling."
"Bundling will be key to Shaw's agenda," says David Christopher, a spokesman for Open Media, a group that advocates on behalf of consumers in Canada's telecommunications industry.
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By giving consumers modest discounts on their posted prices if they sign up for multiple services, telecom companies get to boost their revenue while helping to retain their customers, since people are often unwilling to split up their complex web of telecom services.
The key to the Wind and Shaw deal, Christopher says, will be what happens to prices across all of Shaw's offerings. Generally speaking, Shaw competes with the Big Three in terms of prices, while Wind, meanwhile, generally wins customers by offering unlimited and all-inclusive packages for closer to $35 a month, on average — almost half the monthly revenue the Big Three take in on average from a typical user.
The billion-dollar question for consumers, Christopher says, is what bundled services from Shaw will cost. "The worry is that Shaw will simply hike Wind's low prices to bring them in line with the Big Three," he says, but at least there's historical precedent that simply having a new national player will nudge prices down.
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"When you have more than three players in the market, prices can get substantially lower," he says, noting that in places like Quebec, Manitoba and Saskatchewan — each of which has a viable fourth player in the form of Videotron, MTS or SaskTel — cellphone prices are often as much as $20 a month cheaper than comparable plans just one province over.
Four or more players are the norm in many European markets, where wireless prices are a fraction of those in Canada.
Walid Hejazi, associate professor at the Rotman School of Management in Toronto, says the deal is a win for consumers simply because it gives them another viable option.
"This is a fantastic development," he said in an interview with CBC's The Exchange on Thursday. "I think it's good news for consumers … a fourth player has economies of scope because they have a strong base."
At least for now, Shaw is saying encouraging things about pricing plans, with chief operating officer Jay Mehr saying there's no plan to shift from Wind Mobile's low-cost packages or hike prices.
"This is a winning strategy that's been created, and our plan is to continue on that winning strategy," Mehr said.
The Shaw CEO agrees, telling journalists on a conference call that consumers "are going to love it."
"Consumers will have competition," Wind's CEO Alek Krstajic said "and competition always serves consumers better."
Technology journalist Daniel Bader says Shaw is eager to use Wind's footprint to finally get into wireless and compete with its larger rivals, but he cautions it won't revolutionize the industry any time soon, or come cheaply.
Shaw may spend up to a quarter of a billion dollars to speed up Wind's plan to roll out LTE services, a pricey proposal that could take several quarters to work its way out.
"I see the market stabilizing as people realize it will take Shaw a long time to turn Wind into a viable fourth competitor," the editor of MobileSyrup.ca says. "So, yes, it will impact competition, but not for a long while."