Smartphone subsidies hit Canadian mobile profit margins

While rising smart phone penetration has led to higher average revenue per user, and increased mobile data revenue at the three main Canadian operators (Bell Mobility, Telus Mobility and Rogers Wireless), a Wireless Intelligence study found that, in most cases, operational expenses also have increased, resulting in a contraction of profit margins (earnings before interest, taxes, depreciation and amortization).

Opex costs are higher in large part because of increased handset subsidy costs for new smart phone customers and retention of existing customers who upgrade to smart phones.

That might not be the case in markets where handsets are not subsidized, typically in exchange for a two-year contract.

The study suggests s that the cost of acquisition per subscriber at Bell rose 13.4 percent between 2009 and 2010 and by 3.9 percent at Telus over the same period. There were similar trends in retention spending, which (as a percentage of service revenue) increased by 2.4 percentage points at Bell and 0.7 percentage points at Telus year-on-year, and by 7 percentage points at Rogers in Q4 2010. Opex also increased at all three operators during the period.

High-cost smartphone subsidies impacting operator margins - GSMA Mobile Business Briefing