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Industry report says competition will limit telecoms’ profit growth in 2011


May 27, 2011
By Alyssa Dalton

May 27, 2011 – Increasing competition and higher costs will cut into profitability for Canada’s telecommunications companies this year, according to The Conference Board of Canada’s Canadian Industrial Outlook: Canada’s Telecommunications Industry – Spring 2011.

“Consumers are rapidly adopting new technologies, translating into strong demand for wireless and Internet services,” said Maxim Armstrong, economist.

“However, the industry will struggle to keep cost increases in line with revenue growth. Established providers are investing large sums in faster, new networks, but new players in the Canadian wireless market are limiting price increases,” he continued.

Telecom providers managed to post profit growth of 10.3% in 2010, stated the report, adding that with costs on the rise again, pre-tax profits will dip by 9.5% to $6.7 billion in 2011.

“Costs will continue to grow, led by above-average wage increases and higher interest rates, averaging four per cent a year between 2011 and 2015. At the same time, sales in the wired sector will remain weak and competitive pressures will allow for minimal price increases. The end result will be slightly lower margins and stagnating profits over the next four years,” added the report.