Source: National Post
Wind Mobile revealed subscriber numbers for the first half of the year yesterday that were ahead of many watchers' forecasts. But the rowing is about to get much harder for the startup wireless provider as incumbent carriers step up efforts to guard share.
There is also concern that the young firm is facing a cash crunch.
About 100,000 subscribers signed up with Wind through early July, double what more bearish predictions were calling for and comfortably above even bullish estimates of 80,000, given its early launch woes.
"I think the numbers speak for themselves," said Anthony Lacavera, the carrier's chairman. "We're having a real impact."
Wind won 15% of national net new subscribers through last month -- a promising start for a new provider. "It does confirm that Wind is taking share," National Bank analysts wrote in a note.
But the figure is a veritable drop in the bucket compared with incumbents Rogers Communications Inc., BCE Inc.'s Bell Mobility and Telus Corp. The trio split 330,000 new customer additions in the last quarter alone.
Moreover, Wind is offering steep discounts to gain customers. Analysts question the sustainability of half-priced promotions on mobile data plans, as well as $150 "porting" credits to customers who switch over.
The enticements will have to continue for the next few months if momentum is to be maintained, analysts say, given the launches of rival new entrants Public Mobile and Mobilicity this spring and competitive reactions from Rogers and Bell.
Estimates from SeaBoard Group suggest Public Mobile has added 24,000 subscribers in the Toronto and Montreal markets, while Mobilicity has won 36,000 subscribers in Toronto to date. As the carriers build out further into Wind's coverage areas, a battle for the same customer awaits.
But it's no surprise the bigger threat comes from incumbents.
In July, Rogers took dead aim at the unlimited, no-contract model Wind is pursuing by introducing "chatr", a low-cost brand offering cheap handsets and all-you-can-eat talk and text-messaging. Also, Bell is introducing unlimited plans in its Solo Mobile service this month.
Not only can the litany of new offerings slow Wind down, they can rob directly from the carrier's nascent base. With no contract commitments, National Bank says "churn" or the risk of customer defections is higher.
"We wonder about Wind's operating stresses given the high churn model," the analysts said.
There is also some concern about Wind's financial flexibility. The subscriber figures were released in connection with the release of second-quarter results from its financial and strategic backer, Orascom Telecom. On a call with analysts, the Egyptian carrier indicated it has provided about $650-million to its Canadian investment so far. That leaves only about $100-million remaining in loan lines.
Scotia Capital's Jeff Fan says that figure is sufficient to allow Wind to continue its extensive network deployment this year and to make more marketing noise in the third and fourth quarters -- the most important in wireless as students return to school followed by the holiday shopping frenzy.
But beyond that, there is a risk funds may dry up. "At this rate, Orascom's money is going to run out by year-end," Mr. Fan said.
"There is some urgency that Wind may need to get external funding to continue the build-out."
© National Post