Rogers eyes Olympic windfall
When the world rolls into the 2010 Olympic Games in Whistler, Rogers Communications Inc. is poised to get all the accompanying cellphone dollars despite rival BCE Inc. being the official phone supplier.
That’s because the company has a big advantage over BCE, not to mention Telus Corp., by being the only carrier in Canada using the same cellphone network as most of the world. The hordes of visitors expected to hit British Columbia for the Games will, consequently, be paying Rogers to roam on its Global System for Mobile communication (GSM) network.
“It’s going to be a great benefit for Rogers,” said RBC Capital Markets analyst Jonathan Allen. “It’s a very high-margin business and with no GSM roaming competition it’s absolutely a windfall.”
It’s not something most cellphone subscribers think of, but Rogers’ underlying network is the main reason why the company is cleaning its rivals’ clocks with an industry-leading 6.7 million customers. Rogers is adding more subscribers than Telus and Bell, with 244,000 in the most recent quarter compared with 181,600 and 169,000 respectively.
The same trend is true globally — more than 80% of the world’s cellphone subscribers are on GSM networks with the remainder, mostly in North America, on the rival code division multiplex access (CDMA) standard. Moreover, upward of 90% of new subscribers are signing up to GSM.
Rogers’ switch to GSM, starting in 2000 at an estimated cost of $700-million, is why the company comes out with devices such as the Motorola Razr and the BlackBerry Pearl — not to mention the upcoming Apple iPhone–months before its competitors. It’s also why the company is able to launch innovative services earlier, such as the video calling feature and mobile YouTube introduced by actor William Shatner yesterday.
Analysts say the pressure is building on Telus and Bell, as well as big U.S. CDMA carriers including Sprint, to think about changing as well.
“CDMA is a great technology but scale is important, so carriers have to look at GSM as an alternative over time,” said Genuity Capital Markets analyst Dvai Ghose. “The situation isn’t as immediate or desperate as some people have made out. Over time however, being on the main technology standard whether it’s better or not … suggests the providers have to think about it.” Mr. Ghose estimates it would cost Bell and Telus about $350- million each to add GSM capability to their CDMA networks through an “overlay,” but the cost wouldn’t be significant if spread over a few years.
A spokesman for Bell said it is “too early to tell” whether the company will need to make the switch. Telus officials could not be reached for comment.
Rogers’ expected fortunes at the Olympics are likely to come at the expense of Bell, which paid an estimated $200-million for the rights to be the Games’ official telecommunications provider.
“It’s somewhat ironic that Rogers will get the windfall,” said telecom analyst Mark Goldberg.
from http://www.canada.com
