While it will be awhile before we get a sense of Virgin Mobile's success in Canada, an interesting story is how much of an impact the company will have on the lucrative post-paid market. In less than a month, Virgin already has put the focus back on the pay-as-you-go segment, which had been neglected as carriers pursued the all-mighty ARPU and long-term contracts. Bell Mobility, Telus Mobility and Rogers Wireless recently slashed their pre-paid prices and boosted advertising. This apparently has to do with “staying competitive” in a dynamic market but you have to know the carriers are not happy about spending money on a segment that brings in about 75% less revenue per customer each month.
If Virgin re-ignites the pre-paid market with aggressive marketing and lower prices, what impact will it have on post-paid sales? With wireless penetration rates in Canada close to 50%, it may be that most of the low-hanging post-paid fruit has already been picked. This could see many new customers, who see wireless service as nice-to-have rather than need-to-have, will gravitate to pre-paid service. If this materializes - and I'm not suggesting the post-paid market will disappear - it may force carriers to re-think their growth strategies to focus more energy on consumers who spend far less each month. At the same time, carriers seeking strong sales growth will have to squeeze more out of existing customers by launching new data services.
I may be alone in the wireless woods but I believe the industry love-in now happening in Canada only has two or three years to go. When subscriber growth slows - and it will eventually happen - carriers will need to reload strategically. Virgin's entry into the market could force the Big Three - Telus, Bell and Rogers - to move faster strategically than they would have ideally preferred.
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