Telecoms to compete on service after zero-rating decision: analysts

The CRTC’s decision Thursday to ban most forms of zero-rating means telecoms will have to rely on service in order to stand out from the competition, analysts said. The new rules that prohibit differentiated pricing practices (DPPs) that aren’t data-agnostic and aren’t offered to all customers, among other stipulations, mean Quebecor Inc.’s Videotron won’t be able to keep operating its Unlimited Music service. “In our view, this is a loss of a differentiator for Videotron’s high end (+$65) wireless products … but it is not a game changer for the investment thesis nor does it cause us to consider changing estimates,” Macquarie analyst Greg MacDonald wrote in a research note Friday. “The decision, however, does highlight how the industry is becoming less differentiated on product (implying lower value for media assets within carriers) and more focused on bandwidth alone as a differentiator,” he added. Desjardins Capital Markets analyst Maher Yaghi said in a note that by “closing the door on differential pricing, the CRTC is yet again forcing providers to compete on price and service quality, and away from innovative product segmentation offerings.” Regarding Unlimited Music, he said Videotron’s “zero-rating strategy on music was an important selling argument for the growing number of consumers who now prefer to listen to music via streaming services. However, we anticipate that the company will find another way to make its product attractive (eg data bonuses packages) since we believe it still has to gather a larger market share in wireless in order to be more profitable in the long term.” National Bank analyst Adam Shine echoed RBC Capital Markets analyst Drew McReynolds’ perspective that the decision is unlikely to be material for the company. “While certainly an attractive offer and point of differentiation, it's hard to assess how many subscribers the Unlimited Music Service actually brought in. What the latter did do, however, was play a role in helping to define Vidéotron as an innovator in the sector,” Shine said.

Telecoms to compete on service after zero-rating decision: analysts

Brief | April 21, 2017

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Telecoms to compete on service after zero-rating decision: analysts

Brief | April 21, 2017

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