Industry and Macro Economic Background
Industry and Macro Economic background
In 2000, only four companies (Incumbent Local Exchange Carriers) were controlling 78% of market shares. These companies were: Telus, Bell, Aliant and MTS (Manitoba). Bell Canada had recently stepped up to compete with Telus on their regional customers. Also, during that same period, the wireless industry was controlled by 4 major corporations such as: Cantel, Telus, Microcell and Bell.
Between 1997 and 2000, the communications service industries GDP had increased from 16.4B$ to 22.2B$ which represented 2 to 2.4% of total Canadian GDP. Furthermore, around 1999, communication service industry growth reached a peak of approximately 15% while Canadian GDP barely exceeded 5% growth. Even during the 2001 economic turmoil, the telecom industry growth far exceeded the Canadian GDP growth. In addition, during that same period, the total telecom service revenues went from 19.5B$ to 30B$ while the wireless service providers reached revenues from 2.2B$ to 5.4B$ which represented almost 245% growth for that period.
Although, after the mid 1990’s, deregulation of long distances in wireline services put an increasing pressure on individual companies as they were facing rising competition. This deregulation opened opportunities to ILECS such as Telus to start investing massively and developing CLECs (Competitve Local Exchange Carriers) even though many CLECs had recently failed in this adventure. Although, these large investment requirements were getting more and more difficult to find in an industry facing a decreasing access to capital due to the tech bubble burst in 2000-2001. During that same period, the whole American economy was taking a downturn and the effect on the Canadian side of the border would eventually hit. Falling prices, increasing competition and more difficult access to capital was also putting more pressure on Telus. Part of this new competition was the emergence of