Quebecor Media Inc. subsidiary Videotron Ltd. has announced it will invest between $800 million and $1 billion in a mobile network across Quebec, to be up and running in 12 to 18 months. That number includes the $555 million that Videotron spent on radio spectrum during this summer’s AWS auction.
On Wednesday, Videotron announced the network will create 1,000 jobs at Videotron, and “hundreds” at suppliers.
“Those are all permanent and new jobs,” said Videotron vice-president of corporate affairs Isabelle Desurreault, not jobs shuffled from other Quebecor properties. Videotron is already recruiting 400 people for existing business needs, she said.
Videotron has chosen Nokia Siemens Networks as its supplier for the next five years. NSN will provide “Generation 3.75” base stations that are smaller and easier to install than conventional facilities, and allow remote management to add or move bandwidth without sending personnel to the site.
Veteran telecom analyst Eamon Hoey, senior partner of Toronto-based Hoey Associates, said the announcement doesn’t have any earth-shattering detail.
“The real issues are the value propositions they’re going to come to market with,” Hoey said. New entrants into the wireless market – which also include Shaw Communications Inc. of Calgary, Toronto’s Globalive Communications Corp. and Bragg Communications Inc. in the Maritimes – will face a lot of pressure to bring a business model to the table that’s not like those of incumbents Bell Mobility, Telus Corp. and Rogers Wireless.
“It would be rank foolishness” to use the incumbents’ models, Hoey said.
Hoey figures the new entrants will lean toward pre-paid models, since post-paid contract models are expensive, requiring management of hundreds of different plans. Hoey said that at one point, Bell Mobility offered as many as 1,800 plans.
“In a pre-paid world … you might have 10 plans at the very most,” Hoey said.
Pre-paid carriers also don’t have to maintain contracts or a huge accounts receivable overhead.
Videotron may well be the exception. The company reaches 1.7 million households, or about four million people, with its cable television service. Since Videotron already has a monthly relationship with those customers, they will likely opt for a post-paid arrangement, she said.
Seaboard Group principal Iain Grant said “the opportunity for Videotron on several fronts is attractive.”
He expects Videotron to pass the one-million-household mark for its cable telephone service in Quebec early next year. That, he said, translates to 2.5 million people who could see an advantage in a Videotron full-service bundle. Videotron already has 800,000 home phone households, or about 80 per cent of the market, Dusureault said, and in one unnamed Quebec city, Videotron is No. 1 in home phone coverage.
That market won’t come easy, though, according to Hoey.
“The reality is there are a lot of barriers to entry,” Hoey said, among them the fact that Videotron already resells Rogers Wireless service in Quebec. “The terms and conditions of that agreement may be a hindrance,” Hoey said.
Dussureault said Videotron has an opt-out arrangement with Rogers that will allow the company to move the 55,000 customers who buy Rogers services from Videotron, though she would not provide details, except that customers will need new devices to use the new network.
“We have a migration plan,” she said.
Hoey doesn’t think Videotron will have a significant effect on the market for two to three years, partly because of the number of users who are tied up in contracts with incumbents, who will find “all kinds of reasons” to keep people in their contracts.
“The market for them will not be in the kajillions,” he said. He said Videotron isn’t likely to exceed 300,000 customers in the first year of service.
