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Demand for wireless maintains industry profit levels


December 9, 2008
By Alyssa Dalton

Canada’s telecom industry will remain healthy and profitable, even in the face of a worsening economic outlook, says the Conference Board’s latest forecast for the industry, which calls for annual profits of about $7 billion annually between 2008 and 2011.

“The
continued rapid rate of increase in demand for wireless services—8%
increases on a year-over-year basis—is driving growth in the
telecommunications industry. However, profit levels will remain flat
over the next few years, due to fierce price competition and a slowdown
in demand growth due to the economic slowdown,” said Michael Burt,
associate director, Industrial Outlook.




Although
growth in the telecom industry is not highly correlated with the rest
of the economy, the current uncertainty will slow demand for telecom
services. In 2008 and 2009, industry output will grow by an average of
2.3%, its slowest pace in more than 10 years.




The
auction of the new wireless spectrum earlier this year means new
players are expected to enter both regional and national markets in
2010. These new entrants will only intensify price competition, which
benefits consumers but weakens industry profitability.




(The forecast was completed before recent developments in the proposed sale of Bell Canada Enterprises.)