Telecom profits to increase in 2010 – Conference Board
December 5, 2010
Even in a weak economic recovery, says the Conference Board of Canada, Canada’s telecom industry has continued to experience increases in profitability thanks to cost control and demand for new technologies.
“The sluggish economic recovery made it harder for telecom providers to attract new clients or convince existing customers to expand their service,” said Maxim Armstrong, economist. “However, lower costs and continued demand for new products—such as digital TV and smartphones—helped to keep the telecom industry growing when most other industries were in recession.”
Slower sales and minimal price increases resulted in sluggish revenue
growth over the last two years. Costs, however, increased by just 1%
last year. Low interest rates and a favourable exchange rate—which
lowers the price of imported components— will limit cost growth to 0.9%
This past year was a milestone for the telecom industry, as four new
wireless service providers entered the market. The result for the
industry as a whole is increased competition, which will limit price
growth and reduce profit margins.
Industry profits are expected to expand by 11.6% to $7.5 billion in
2010, building on a 5.6% increase in 2009. Profit levels are expected to
stagnate starting next year as increased competition limits the ability
of providers—notably in wireless services— to raise prices.
(Information from the Conference Board of Canada’s “Canadian Industrial
Outlook: Canada’s Telecommunications Industry â€“ Autumn 2010”.)