December 16, 2009 / 10:02 PM / in 9 years

Globalive's Wind plans pose risk to incumbents

OTTAWA (Reuters) - Service plans from upstart Globalive Wireless may pose a risk to Canada’s three largest carriers, but it is premature to cut estimates for the incumbents, a telecoms analyst said on Wednesday.

Anthony Lacavera (R), Chairman of Globalive and WIND Mobile and Ken Campbell, CEO of WIND Mobile, speak at a news conference in Toronto, December 11, 2009. REUTERS/Mark Blinch

Globalive launched service in Toronto under the Wind Mobile banner on Wednesday, after the Canadian government last week overturned a regulatory ruling that had blocked the Egyptian-backed company.

It joins Rogers Communications Inc, Telus Corp and Bell as the country’s fourth national wireless carrier.

“Given the introduction of Wind Mobile’s C$45 value-based price plan, it is reasonable to assume a C$5 to C$10 response from incumbents,” said National Bank Financial analyst Greg MacDonald in a note.

“When and if incumbents do respond is a question of how strong Wind Mobile’s distribution network will be to reach its target distribution subscriber base.”

Wind offers voice and data plans between C$15 and C$45 but will require customers to pay the full cost of phones up front. It is opening 13 sales kiosks at 16 Blockbuster Video stores in Toronto and four in Calgary, with plans to open stores in Vancouver, Ottawa and Edmonton in 2010.

MacDonald estimates Wind’s C$45 talk and text plan is about 36 percent cheaper than current comparable offerings and represents the biggest near-term threat to incumbents.

When new entrants offer plans 15 percent to 20 percent cheaper than existing plans, it poses an increased risk to incumbents’ average revenue per user, a key industry metric.

“Today’s announced plans could potentially pose an ARPU risk in addition to a decline in traditional access line revenues through wireless substitution,” MacDonald wrote.

“We are not ready to lower our estimates for the incumbents until we see more evidence of greater distribution capabilities from Wind Mobile and whether or not the incumbents retaliate with a reprice.”

Shares of Rogers, Telus and BCE dropped last week when Globalive was cleared to operate.

On Wednesday, Rogers stock fell 23 Canadian cents to end at C$30.47, Telus gained 91 Canadian cents to end at C$32.96 and BCE added 2 Canadian cents to close at C$26.38 on the Toronto Stock Exchange.

($1=$1.06 Canadian)

Reporting by Susan Taylor

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