WIND Canada Q1 2012 Results

WIND Canada Q1 2012 Results

After a fairly strong Q4, we were expecting strong results from WIND, who with the some momentum were poised to make significant customer gains in a quarter where incumbent usually lose lots of subscribers.  Well the incumbents did lose a lot of subscribers, more than ever and for the first time, both Bell and Rogers had negative nets.  So we assumed that this would mean a blow out quarter for the new entrants.  Videotron underwhelmed so we assumed the incumbent losses were not in Quebec.  But now that WIND has released their numbers, we are concerned on two fronts.  Nets and ARPU.

Nets

Yes, nets grew by nearly 12,500 subscribers, but in a quarter where incumbents lost nearly 200,000 prepaid subscribers and lost nearly 25,000 total subscribers, we thought that all of this could be picked up by the new entrants.  And in their conference call, Bell talked about increasing fixed-wireless substitution and Bell and TELUS lost over 150,000 wireline subscribers.  If we assume that a third of the landline losses went to VoIP providers (they did not go to cable), then the other 66% went to wireless-fixed substitution.  Then there should have been a total of 125,000-300,000 subscribers up for grabs in the quarter, but WIND and Videotron only account for 35,000 of these?  We would be very surprised if Mobilicity and Public made up the difference.  We think Mobilicity blew out the lights in Q4 in the hope of raising additional finance on these results, so they had no dry powder for another big quarter.   Public Mobile did not noticeably lift their game either.

EOP

So assuming Mobilicity gains 10k and Public 20k new net customers, this means that the new entrants will still have less than 5% of the overall market despite huge subscriber losses at Bell and Rogers.

ARPU

Our second worry is ARPU.  WIND’s ARPU was up 2.2% from $26.7 to $27.3 or a whopping 60 cents per subscriber.   But TELUS was up 1.7% and Bell up over 4% (although much based on mix changes from losing so many low ARPU prepaid subscribers).  In fact TELUS enjoyed nearly and extra $1 per subscriber across nearly 7.5m subscribers, whereas the poultry $0.60c increase across 415k subscribers if not nearly as significant.   With ARPU of less than half of the incumbents, WIND and Mobilicity have a fundamental problem with their business model.  So it might be a good thing they did not acquire too many new customers?

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