Bell’s low-cost Lucky Mobile a hit with government

BCE Inc’s move to open a low-cost, prepaid carrier is “well-timed” and positioned to support the government’s direction for consumer-friendly mobile options, according to analysts. “With the government’s ongoing focus on affordable wireless services and politicians preparing their campaigns for the upcoming federal election in 2019, we believe BCE’s launch of Lucky Mobile is well-timed,” Barclays Capital analyst Phillip Huang said in a Friday note, suggesting the prepaid segment is “rapidly growing but underserved.” The note comes hours after Bell announced the launch of Lucky Mobile, a new prepaid brand starting at $20 with unlimited calling and text options that requires no credit check, contract and will incur no pay-per-use charges. The company hinted at the service in previous conference calls with analysts, when it mentioned that it was gunning for a bigger piece of the prepaid pie. Reaching back to his speech at the Canadian Telecom Summit in June — in which he ordered the CRTC to reconsider its decision on WiFi-based mobile virtual network operators for reconsideration — Innovation Minister Navdeep Bains applauded Bell’s product. “We thank Bell Canada for listening and taking a step in the right direction by introducing Lucky Mobile, a low-cost wireless carrier,” he said in a press release Friday. “We encourage all of the telecom companies to continue working in the right direction and offering Canadians more flexible and affordable options.” Lucky will launch on Dec. 4 in 17 cities in Ontario, Alberta and British Columbia, including Toronto, Calgary, Edmonton and Vancouver. The service will be zone-based, meaning low-rate subscribers will pay one fee to call and browse online in those cities and surrounding areas. It will also have more expensive plans, which cover province-wide and Canada-wide calling and browsing options. The service will also have data plans from one to four gigabytes, which won’t exceed 3G speeds, the release noted. The provider will not charge overage or automatic fees, meaning when users exceed the data they are allotted, download rates are reduced to 2G speeds. Users will be notified when they are about to use services not included in their monthly plan, the release noted. Those who want to spend a little extra can get 30-day service passes that would give them additional features on top of their monthly plans, including international calling. The release said those passes will be available for $3 or $5. Lucky also committed to roll out WiFi-based talk and texting services in 2018. Bell is targeting certain segments of the market, including students, seniors on fixed incomes and immigrants without a credit profile built up. On past conference calls, executives of some of the country’s largest wireless providers noted Canada’s healthy influx of immigrants as one reason for the postpaid segment’s torrid pace as of late. Analysts zeroed in on the differentiating features of the Lucky service. Canaccord Genuity analyst Aravinda Galappatthige said in a Friday note that not having a pay-per-use service is “unlike many current prepaid offerings” and their offers appear “compelling” compared to offerings from Rogers Communications Inc.’s Chatr, Telus Corp.’s Public Mobile and Bell’s very own Virgin Mobile. Bell chief financial officer Glen LeBlanc told RBC Capital Markets analyst Drew McReynolds during the bank’s TMT conference this month that the company has the ability to compete on several fronts, including on network performance and pricing. That position came in response to a question from McReynolds about recent moves by Shaw Communications Inc.’s Freedom Mobile to offer 10 gigabytes for $50, announced last month. Galappatthige said in his note that Rogers could be the carrier most impacted by the move, as it had taken the most prepaid net subscribers since the second quarter of 2015 and 90 per cent in the third quarter this year. But McReynolds said in an email Friday that if Lucky’s plans don’t include a lot of voice, text and data, “then the service should not have a material impact on the rest of the market.” “Bigger picture, the strategy makes sense for BCE (and all players) as wireless penetration becomes more saturated in Canada, and as a way to capture and potentially migrate lower-end subscribers to postpaid plans over time,” McReynolds added. As such, LeBlanc said the long-term strategy was to get customers of Lucky comfortable with the Bell brand to potentially move them over to its postpaid plans, which analysts pointed out was the “real opportunity” that could be reaped from the new service. “In our view, the greater opportunity is to build a solid relationship with these new customers, so that over time these subscribers migrate upwards to the higher-value Bell Mobility and Virgin Mobile brands,” Galappatthige said in the note. Galappatthige said he anticipates the service will slightly reduce average revenue per user. However, its low-cost model, which includes “no subsidies, online self service and lower customer care commitments,” will largely be neutral to earnings before interest taxes depreciation and amortization. Lucky will have retail locations in Wal-Mart Stores, Inc., The Source (Bell) Electronics Inc., and mobile phone vendors, according to the release, where consumers will be able to purchase handsets from manufacturers like ZTE Corp., TCL Corp.’s Alcatel and LG Corp. Sim cards will be available for customers who bring their own devices. Lucky will be entering markets with growing competition, as Freedom operates in those areas, Desjardins Capital Markets analyst Maher Yaghi said in a Friday note. But the strategy, he argued, is to ensure that no part of the market is left unaddressed more than it is about big profits for the company. — With reporting by Bryson Masse at bmasse@thewirereport.ca and editing by Ahmad Hathout at ahathout@thewirereport.ca

Bell’s low-cost Lucky Mobile a hit with government

News | December 1, 2017

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