August 13

Rumours of Telus shifting to GSM hurts Rogers shares

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Byline: CATHERINE McLEAN; TELECOM REPORTER

Rogers Communications Inc. shareholders were rattled yesterday by speculation that rival Telus Corp. might threaten their technological stronghold by adopting GSM wireless technology, but analysts believe it won’t be an easy decision for Telus to make.

The main selling point of GSM (global system for mobile communication) is that it’s the most popular cellphone technology around the world. That means GSM carriers such as Rogers tend to get devices at cheaper prices and sooner than their rivals, including Telus, which use CDMA (code division multiple access) technology.

Making such a jump, however, would be a tricky endeavour for Telus. It could cost anywhere from several hundred million up to a billion dollars, analysts reckon. Moreover, the time required for such a change is uncertain, with some suggesting it could be done within a year and others estimating it could take twice as long.

“I don’t envy the decision because I don’t think it’s an easy one,” said National Bank Financial Inc. analyst Greg MacDonald.

Experts agree it’s an issue that Telus can’t ignore when it looks at the future of its cellphone business. A recent media report suggested the company, based in Burnaby, B.C., is contemplating switching to GSM.

Although Telus declined to comment, rumours about a shift pushed Rogers shares down 2.6 per cent yesterday.

As the only GSM carrier in Canada, Rogers does very well. The company collects some $500-million a year from travellers who come to Canada and use their cellphones. As well, many Canadians who take frequent trips overseas and want to use their cellphones, sign up with Rogers.

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Having to share these customers and their revenue with Telus wouldn’t be fun. “This would be a lot more competition for them,” said Troy Crandall, an analyst at MacDougall MacDougall & MacTier Inc.

Probably the most important factor to consider in making such a move is when Telus believes the so-called fourth generation, or 4G, wireless technologies will hit the market. If it’s within the next few years, there is less of a business case to switch to GSM since Telus would then upgrade to 4G shortly after, analysts say.

“The window of opportunity for a GSM migration has either closed or is closing very quickly,” said RBC Dominion Securities Inc. analyst Jonathan Allen.

If the arrival of 4G is further out, however, Telus will have to consider taking action now.

A later launch of 4G “starts to bring into question whether you need GSM for competitive reasons today as opposed to waiting,” Mr. MacDonald said.

There would be some big issues to iron out with a move to GSM. Telus and Bell Mobility Inc., the other CDMA carrier, share wireless networks across the country. So, Bell would also need to move to GSM or Telus would have to strike a roaming agreement with Rogers so customers from its home territory in Alberta and British Columbia could still make calls when they travel across Canada.

Otherwise, Telus could be stuck with a much bigger bill to build a GSM network across the country, or be left with a GSM network that couldn’t compete with Rogers, analysts say.

Bell spokesman Mark Langton said the company is committed to CDMA, but has an eye to the future as wireless technologies converge with 4G.

One potential opportunity for Telus is to build a GSM network in certain areas in Western Canada. Then it could tap into roaming revenues for visitors who come to Canada during the 2010 Olympics in British Columbia, said SeaBoard Group’s Amit Kaminer.

ROGERS (RCI.B)

Close: $39.25, down $1.05

TELUS (T)

Close: $46.36, down 28cents

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Wireless technologies

CDMA

Code division multiple access, a digital wireless technology adopted in the early 1990s, used mainly in North America. CDMA development group says there are 421 million subscribers around the world. CDMA carriers Telstra in Australia and Vivo in Brazil recently switched to GSM. Incompatible with GSM networks.

GSM

Global System for Mobile Communication, a digital wireless technology used around the globe. GSM has more than two billion subscribers globally, according to GSM World. Globe-trotting travellers prefer a carrier with this technology because they can use their phone anywhere. GSM carriers were first to get RIM’s BlackBerry Pearl and Apple’s iPhone.

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4G

The next network upgrade, the fourth generation. Offers faster download speeds, will handle more bandwidth demand, and provide more ways to connect to other devices such as cameras, cars and home appliances.

The debate

Carriers are battling over which type of 4G technology to use. Some are choosing European technology Long Term Evolution; others are going with mobile WiMAX, from big tech companies such as Intel and Cisco; or Ultra Mobile Broadband, by Qualcomm, which developed CDMA.




Posted August 13, 2016 by maxroam in category "Uncategorized