Higher costs cut into telecom industry profits

    OTTAWA, Nov. 20 /CNW Telbec/ - Higher costs will limit profit growth in
Canada's telecommunication industry to 3.2 per cent, reaching just over 
$6 billion in 2007, according to the Conference Board's Canadian Industrial
Outlook: Canada's Telecommunications Industry - Autumn 2007.
    "Even though the telecom services sector has been plagued by weak pricing
and sales growth, profits have improved steadily thanks to weak appreciation
in material costs," said Michael Burt, Principal Economist. "However, with
cost growth expected to accelerate, profit growth will be sluggish for the
rest of the forecast period. Industry costs are expected to increase by 
5.4 per cent in 2007 and will rise by an average of 3.6 per cent for the next
four years."
    Regulatory changes continue to influence the performance of the
telecommunications industry. Deregulation of local voice services in many of
Canada's large urban areas is expected to increase competition, and the
government auction for new wireless spectrum licenses planned for early 2008
has the potential to increase the number of wireless service providers in
    The forecast assumes business will continue as usual after the spectrum
auction, resulting in modest price gains. However, if the spectrum auction
introduces new players into Canada's wireless market, the increased
competition will lower prices further.
    Given the competitive pressures in the industry, profit margins are
expected to fall slightly over the forecast period. Profits will grow at a
modest pace to reach $6.3 billion by 2011.

For further information:

For further information: Yvonne Squires, Media Relations, (613)
526-3090, ext. 221, corpcomm@conferenceboard.ca

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