A Strategic Analysis for Competing in the Canadian Consumer Wireless Telecommunications Market
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A STRATEGIC ANALYSIS FOR COMPETING IN THE CANADIAN CONSUMER WIRELESS TELECOMMUNICATIONS MARKET Josef Alexander Pach M.Sc. (Earth Sciences), University of Waterloo, 1994 B.Sc. Eng. (Geological), University of New Brunswick, 1989 PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION In the Faculty of Business Administration Executive MBA O Josef A. Pach 2006 SIMON FRASER UNIVERSITY Summer 2006 All rights reserved. Thls work may not be reproduced in whole or in part, by photocopy or other means, without permission of the author. APPROVAL Name: Josef A. Pach Degree: Master of Business Administration Title of Project: A STRATEGIC ANALYSIS FOR COMPETING IN THE CANADIAN CONSUMER WIRELESS TELECOMMUNICATIONS MARKET Supervisory Committee: Dr. Neil Abramson Senior Supervisor Associate Professor of Strategy Dr. Ed Bukszar Second Reader Associate Professor Date Approved: SIMON FRASER UNlvERSlTYl ibra ry DECLARATION OF PARTIAL COPYRIGHT LICENCE The author, whose copyright is declared on the title page of this work, has granted to Simon Fraser University the right to lend this thesis, project or extended essay to users of the Simon Fraser University Library, and to make partial or single copies only for such users or in response to a request from the library of any other university, or other educational institution, on its own behalf or for one of its users. The author has further granted permission to Simon Fraser University to keep or make a digital copy for use in its circulating collection, and, without changing the content, to translate the thesislproject or extended essays, if technically possible, to any medium or format for the purpose of preservation of the digital work. The author has further agreed that permission for multiple copying of this work for scholarly purposes may be granted by either the author or the Dean of Graduate Studies. It is understood that copying or publication of this work for financial gain shall not be allowed without the author's written permission. Permission for public performance, or limited permission for private scholarly use, of any multimedia materials forming part of this work, may have been granted by the author. This information may be found on the separately catalogued multimedia material and in the signed Partial Copyright Licence. The original Partial Copyright Licence attesting to these terms, and signed by this author, may be found in the original bound copy of this work, retained in the Simon Fraser University Archive. Simon Fraser University Library Burnaby, BC, Canada Summer 2006 DISCLAIMER The statements, analyses and opinions made in the following document are solely those of the author and do not represent those of TELUS Communications Company, its employees, shareholders, customers or suppliers. This document contains statements about expected future events and financial operating results of TELUS that are forward-looking. By their nature, forward-looking statements require the writer to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause actual future results and events to differ materially from that expressed in the forward- looking statements. Accordingly, this document is subject to the disclaimer and qualified in its entirety by the assumptions, qualifications and risk factors referred to in the discussion and analysis herein. All financial information is reported in Canadian dollars unless otherwise specified. ABSTRACT The purpose of this study is to analyze competition in the Canadian wireless consumer market and suggest strategies for TELUS Communications Company (TELUS) to compete against its main rivals, Bell Mobility and Rogers Wireless. While TELUS outperforms its rivals in a number of areas, it lags behind them in terms of total subscribers and revenue, particularly in ON and QC. Low wireless penetration rates in Canada suggest that there is still room for significant subscriber and revenue growth. Furthermore, technological change has resulted in convergence of wireless data, voice and IP capabilities. Each of the three rivals offers converged, high-speed wireless applications, and there is little to differentiate one from the other. This study recommends that TELUS consider significantly increasing its sales presence in ON and QC over a three-year period, with a marketing focus on its Spark entertainment bundle, to build its customer base and increase revenue generation. Keywords: TELUS; wireless; telecommunications; consumer DEDICATION To my most patient and loving wife Erin and our new son Jamie Alexander. You are the apples of my eye. ACKNOWLEDGEMENTS I would like to gratefully acknowledge the financial support of TELUS Communications Company and specifically Mr. Kasey Reese (VP Risk Management and Chief Internal Auditor) and Mr. Bob McFarlane (EVP Finance and CFO). I would also like to thank Dr. Neil Abrarnson and Dr. Ed Bukszar for their review and insightful comments. In addition, I would like to thank the SFU EMBA administration and staff, my fellow cohort members from EMBA 2004 and, last, but by no means least, my cherished team mates Saf, Cheryl and Jonathan. You were a constant source of inspiration, good humour and support throughout this program and I look forward to life-long friendships with each of you. TABLE OF CONTENTS .. Approval ......................................................................................................................................... 11 Abstract .......................................................................................................................................... iv Acknowledgements ........................................................................................................................ vi .. Table of Contents......................................................................................................................... VII List of Figures ................................................................................................................................ ix List of Tables ................................................................................................................................... x Glossary.......................................................................................................................................... xi 1 Overview ................................................................................................................................... 1 1.1 TELUS Communications Company ................................................................................1 1.1.1 Background ................................................................................................................1 1.1.2 Services Offered by TELUS ......................................................................................2 1.1.3 TELUS' Current Wireless Strategy............................................................................ 5 1.2 The Canadian Wireless Telecommunications Industry ...................................................6 1.3 Problem Definition ........................................................................................................10 1.3.1 Theproblem .............................................................................................................10 1.3.2 TELUS' Decision Criteria ........................................................................................ 11 External Analysis ................................................................................................................. 14 2.1 Five-Forces Industry Analysis ......................................................................................14 2.1.1 Threat of New Entrants - weak to medium .............................................................. 16 2.1.2 Bargaining Power of Customers - medium moving to high .................................... 27 2.1.3 Threat of Substitutes - medium ..............................................................................-32 2.1.4 Summary ..................................................................................................................33 2.1.5 Bargaining Power of Suppliers - weak to medium ..................................................34 2.1.6 Industry Attractiveness............................................................................................. 38 2.2 The Wireless Industry Value Chain ..............................................................................40 2.2.1 Software and Applications Development .................................................................41 2.2.2 Content Developers and Providers ...........................................................................42 2.2.3 Operators and Service Providers ..............................................................................42 2.2.4 Marketing and Retail ................................................................................................44 2.2.5 Consumers ................................................................................................................45 2.2.6 Summary ..................................................................................................................46 2.3 Rivalry Among Existing Competitors ...........................................................................46