Smartphone gain, profit pain

Melissa Chua
08 Apr 2011
Daily News

Operators’ efforts to increase smartphone penetration and gain higher ARPU from data revenues have come at a cost, especially in mature markets.

Research on the Canadian market conducted by Wireless Intelligence has shown that two of the country’s three operators have reported an increase in Opex and subsequent contraction of ebitda margins, as a result of the smartphone revolution.

The increase in Opex was mainly due to higher handset subsidies and customer retention costs.

Results showed that Bell, Canada’s second largest operator, saw a 13.4% increase in the cost of acquisition per subscriber between 2009 and 2010. Retention spend as a percentage of service revenue had increased by 2.4% at the operator and 7% at rival Rogers.

Canada’s largest operator Rogers, which had the highest proportion (41%) of smartphone users among the three firms, said data revenue had grown 32% to account for 31% of total mobile service revenue.

The company had activated or upgraded 635,000 new smartphones for Q4 last year; however, Rogers reported a 90% year-on-year increase in smartphone upgrades in that quarter, which it said was the single largest increase in Opex. Total retention spending in the quarter had also risen 76% year-on-year to C$269 million ($280 million).

Telus, Canada’s smallest operator with a 7 million strong subscriber base, said smartphone users represented 33% of its total subscriber base at the end of last year, up 20% from 2009.

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