Research -Telecommunication Industry in Canada

12 Jun

It was my another assignment in 2008 as the below. My predict was not bad according to the stock charts of the Telecommunication Industry in Canada during the current years.

Market Overview

The Canadian wireless telecommunication services market grew by 14.58 % per year on average from 2003 to 2007 to reach a value of about $15 billion. In 2011, the Canadian wireless telecommunication services market is forecast to have a value of about $21 billion. The Canadian wireless telecommunication services market grew by 11.45 % per year since 2003 and to reach a volume of 20 million subscribers. In 2011, the Canadian wireless telecommunication services market is forecast to have a volume of 26.9 million subscribers. In the foreign market, Canada accounts for 7% of the Americas regional market value during 2006.

In the Canada wireless telecommunication service market, Rogers Communications was generating 36.6% of the market’s total volume in 2006. Bell Canada and TELUS Mobility were generating 31.70% and 27.30% of the market’s total volume.

The Canadian wireless telecommunication industry was at a growth stage of a business cycle, and its net profit has been increasing in recent years.In the next a few years, it is going to a mature stage of the wireless telecommunication service in a business cycle . The wireless telecommunication services usually focus on a local market; hence, there are not a lot of influences by some foreign markets. There are not a lot of foreign competitors in the Canadian telecommunication services’market now.

Every year, a lot of immigrants bring their capital, technology or knowledge to Canada. They work hard and want to build new homes. As a result, they increase societal consumptions, and reduce the business cycle period. They stimulate economic development in Canada. Every year, the population is increasing by 1% providing a large potential customer base to Canadian business such as communication business, food business and transportation business etc. Canadian economy has enjoyed steady development in recent years, and Canadian GDP has been increasing by around 3% annually. In order to support economies continue development; as a result, the communication technology will play an important role in the modern society.

Leading Companies

Rogers Communications Inc.

Rogers Communications Inc was founded in 1920 and is based in Toronto, Canada. It includes three businesses: wireless, cable and telecom; and media. This segment markets its products and services under the Rogers Communications and Fido brands through a distribution network of about 11,500 dealer and retail locations across Canada. It operates in the communications and media business in Canada, and provides services including cable television, local phone and long distance and wireless voice and data communications, radio and television broadcasting and high-speed Internet access. It also operates in video retailing, televised shopping, consumer magazines, trade and professional publication business as well as sports entertainment.

TELUS Corporation.

The company is the largest telecommunications service provider in western Canada. It provides a range of telecommunication products and services including IP, voice, entertainment and video. The company has 5.1 million wireless subscribers, 4.5 million network access lines and 1.1 million Internet subscribers.

BCE Inc.

Bell Canada Inc was founded in 1880 and is based in Montreal, Canada. It is Canada’s largest communications company offering local and long distance telephone, wireless communications, Internet access, data transmission and other service. Bell Canada Inc. Provides wireline and wireless telecommunications products and applications, satellite communications and direct-to home television services, systems integration expertise, electronic commerce solutions, Internet access, content and high-speed data services, primarily in Canada.

Bell Canada’s strategy of focusing on recurring revenues from its growth services combined with cost containment across all business units led to strong Bell EBITDA as BCE Inc. In wireline business, EBITDA grew by 5.4% as cost containment across all units, the strategy to move away from low margin equipment sales and lower pension costs, offset the erosion of higher margin legacy services. The main revenues come from wireline service and wireless service. The BCE has a higher net profit margin; as a result, BCE will have a higher return on stock than others. It is a more profitable stock.

The BCE has a higher current ratio 1.16 compare with Rogers 0.78; as a result, BCE has strength on a short-term solvency.

Although the three companies are telecommunication companies, they have their different main products. The majority of BCE’s revenue comes from wireline services, whereas Rogers focuses more on a wireless services and cable services. TELUS focuses on the main products of the two companies BCE and RCI, which are wireless services and wireline services. The wireline and wireless can make more profit than other communication products because they have higher net profit margins. Bell Canada and Rogers have diversified their products in the market. As a result, they can survive and earn profit in the telecommunication industry for a long time. Bell Canada and Rogers have some common products and services in Canadian market.

Bell Canada delivers CBC/Radio-Canada’s exclusive coverage of the Beijing Games on a number of digital platforms on Feb 1, 2008. Moreover, Bell Canada will be a premier national partner and exclusive communications partner to the Vancouver 2010 Olympic and Paralympic Winter Games. Those are good business opportunity to Bell Canada increase its market shares and net profit.

“Takeover of BCE passes key hurdle” in the Canadian Press, Craig Wong reported that BCE buyout by Ontario Teachers’ Pension Plan. It is favorable for BCE as it will get out from bondholders. BCE will reduce its company’s risk from reducing their debts. The BCE stock price would likely go up in the near future.

Overall, the telecommunication industry has a good prospect and is the favourable sector to investors. The telecommunication industry is at a growth stage of a business cycle; therefore, there are still some potential markets for expansion leading to increasing profits. Telecommunication industry has large potential customers in Canada market because the population continues to increase every year due to new immigrants, and we are in a high technology world. There is more and more demand for the wireless service and wireline service in recent years; as a result, the increasing demand will bring up the amount of supply. In the Canadian telecommunication industries, although companies have some common products, they also have some unique products and services in different locations. Consequently, the large companies can co-survive in the telecommunication market for a long time. Telecommunication industry is a high technology industry. It is a high-risk business but there is a high profit margin on their products and services. It is an attractive industry as investment purposes.

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Posted by on June 12, 2012 in Finance


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