Canadians make smart choice with mobile phones

New phones, networks and consumer habits are bringing a new level of unpredictability to Canada’s wireless space, and are expected to leave much of the mobile-phone market up for grabs in the coming months.

Echoing similar announcements from Rogers Communications (TSX:RCI) and Bell Canada (TSX:BCE), Telus Corp. (TSX:T) said that, in the second quarter, its average monthly revenue per user – how much mobile-phone customers spend on calls and data – dropped 6.6%.

Telus attributed the drop to a reduction in minutes usage and “economization” of rate plans by consumers.

And while a report out this month from the Organisation for Economic Co-operation and Development (OECD) suggests that phone bills in Canada, Spain and the United States are highest of all OECD countries, research firm IDC Canada estimated that cellphone shipments in Canada only declined 1% from the same quarter last year.

Canadians, it appears, are trying to keep their phone bills down, but when it comes to new phones, they are still keenly adopting the latest and greatest.

“We’ve found that the mobile-phone category is fairly insulated from the downturn in the economy,” said Cary Skidmore, vice-president of marketing at Glentel Inc. (TSX:GLN).

The Burnaby-based multi-carrier mobile-phone retailer reported a 14% year-over-year increase in sales of mobile phones and plans last quarter.

The company attributed the growth to consumer adoption of smartphones, the introduction of new competing phones and the opening of 18 new retail outlets in the last 12 months.

Skidmore said that since the launch of the iPhone in Canada in July 2008, smartphones have become the dominant player in the Canadian market.

Prior to that time, Research in Motion’s Blackberry – the most successful smartphone on the market – was largely viewed as a luxury for the business set.

The iPhone and Blackberry are the most popular smartphones in Canada by volume sales, but Bell and retailers such as Glentel have high hopes for the Palm Pre, which will be available in Canada at the end of August.

The Pre, which is being exclusively carried by Bell, has a touch screen similar to the iPhone, but also has a sliding keypad, which may appeal to businesspeople that are accustomed to the functionality of the Blackberry.

Voice communication is being usurped by text messaging and web browsing as the top considerations for Canadians when buying a new phone and monthly plan.

“Web browsing has taken a massive leap forward in terms of how quick it can be,” said Christopher Bennett, director of communications at Best Buy Canada Ltd.

“Now that I can have the web much quicker, I’m likely to consume more of the web.”

As a result, some of the best-valued phone plans are biased toward data and text.

And while data can be bundled in sizes ranging from 500 megabytes to six gigabytes, Bennett said that Canadians are looking to the simplicity and value of unlimited plans.

“If you can find ways to make the data less expensive and find a better bundle – where there’s less thinking for the consumer – you’re going to win,” said Bennett.

Best Buy is rolling out store-within-a-store outlets that exclusively sell mobile-phone services, and is opening stand-alone mobile-phone sales locations across Canada in the coming months.

Bennett also noted that next-generation phones are appearing on the market more quickly.

As a result, some of the most inexpensive phones are older models.

Carriers are dropping the prices of such phones, said Bennett, “to try to catch the late adopters.”

For example, after the launch of the new 3GS iPhone in Canada this summer, the price of the older-model 3G iPhone dropped from $199 to $99.

Rogers, which operates the sole Canadian network that can support the iPhone, has had a lock on the iPhone market in Canada, but rumours are swirling that Telus and Bell may complete a network upgrade as early as this fall – allowing them to offer the iPhone to customers.

Around that same time, new wireless entrants are expected to enter major urban markets, making the wireless space even more competitive.

Bennett noted that competition in space will continue to increase as the back-to-school season roles into the Christmas holidays.

“The winner there will be who offers the most selection with the best-valued unlimited plans.”