Quarterly Monitor of Telecommunications Services

Up to the Fourth Quarter 2002

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Telecommunications Policy Branch: Government On-line, June 2003 [Endnote 1]

Wireless Revenue Growth Offsets Decline in Wireline Revenues

Total revenues from the telecommunications service industry remained relatively flat in the fourth quarter of 2002, increasing by 0.1 percent compared to the fourth quarter of 2001. Revenue from wireless services increased 16.0 percent over this period, offsetting the 4.1 percent drop in wireline revenue.

Figure 1

Local Services the Source of Wireless Growth

The robust increase in wireless revenue stemmed from local services, which generated revenue growth of 16.4 percent this quarter, compared to 2001 Q4. Increasing by 4.6 percent, wireless long distance revenues continued to trend upwards, albeit with considerable seasonal variation.

Figure 2

Growth in the Wireline Industry Declining

Both local and Long distance revenues continued to decline, as compared to 2001 Q4, respectively falling by 0.9 percent and 4.2 percent. Consequently, other revenue streams have become increasingly important to the wireline industry; however, these revenues have slowed as well. For example, revenue from calling features increased 4.5 percent, which is less than half the average rate of 10.2 percent since 1999.

Figure 3

Revenue Growth Spurs Wireless Operating Margin [Endnote 2]

Double-digit revenue growth in the wireless market segment resulted in an 19.2 percentage point increase in operating margin in the fourth quarter of 2002, when compared to 2001 Q4. However, the operating margin in the wireline market segment declined by 1.1 percentage points over the same period. In the second half of 2002, the wireline and wireless market segments had similar operating margins.

Figure 4

Wireless Subscriber Additions Begin to Slow

The wireless market may be beginning to mature as mobile subscribers increased by only 9.1 percent this quarter, significantly below the average rate of 19.7 percent since 1999. Total telecommunications access increased 2.0 percent as a 1.8 percent drop in wireline access lines partially offset wireless subscriber growth.

Figure 5

Capital Expenditures on the Decline [Endnote 3]

Capital expenditures fell considerably in each quarter of 2002, when compared to the same quarter in 2001. Wireline capex declined by nearly one-third from 2001 Q4, while wireless capex fell by 18.5 percent. The declines in telecom capital expenditures may have improved the telcos net earnings, but a reduction in telecommunications infrastructure expansion may hinder future industry growth.

Figure 6

Full Time Employment Fell as Telcos Restructured Operations

Full-time employees declined by 3.9 percent this quarter, compared to the fourth quarter of 2001, as several of the telecom service providers restructured their internal operations to improve operating efficiency. Both the wireline and wireless sectors witnessed declines in employment, by 3.1 percent and 7.9 percent, respectively.

Figure 7

Sources: Statistics Canada, "Quarterly Telecommunications Statistics," Science, Innovation, and Electronic Information Division, and Industry Canada estimates based on publicly available sources.

For additional information see the report, Telecommunications Service in Canada: An Industry Overview at: http://strategis.ic.gc.ca/epic/internet/insmt-gst.nsf/vwGeneratedInterE/sf05637e.html

Contact: Nolan Wiebe, DGTP, (613) 990-4240
Email: Wiebe.Nolan@ic.gc.ca

Endnotes: 

1. Data used in this report are not adjusted for seasonal variation.

2. Operating Margin is defined as Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) divided by Revenues.

3. The unusually high capital expenditure in Q1 2001 is the result of purchases at Industry Canada's spectrum auction ($1.5 billion).