TORONTO – In the competitive landscape of Canada's telecommunications sector, major carriers are traditionally engaged in a constant struggle to win new cellphone and internet subscribers. This competition often manifests through promotional offers and bundled services as consumers expect declarations of superiority regarding metrics such as broadband speed, call reliability, and overall network coverage.
As these telecom companies pursue growth and profitability, some industry analysts suggest a necessary diversification of investments, specifically into technology services, including artificial intelligence (AI). Gérard Pogorel, an economics professor at Télécom Paris, remarked that a key aspiration for telecommunications companies is to transition from being perceived solely as 'telcos' to operating more like technology firms, hence the idea of evolving into 'tech-co' brands.
Pogorel was one of several international experts who presented at a telecom seminar hosted by the Ivey Business School in Toronto. This event emphasized the significance of innovation in shaping telecom policy and leveraging new technologies to drive economic growth amid a backdrop of disruption and geopolitical challenges.
Peter Cramton, an emeritus professor of economics at the University of Maryland, commented on the outperformance of large tech companies compared to telecom carriers over the past decade. He suggested that while telecom providers have largely saturated the market, limiting their customer growth potential, there remains substantial opportunity for them to pursue the transition to tech-focused business models, which could unlock significant value that has yet to be realized.
According to Dave Heger, a senior equity analyst at Edward Jones, the Big Three telecommunications companies in Canada have been hindered by a "double whammy" affecting traditional subscriber growth. This includes declining consumer prices fueled by the rise of Quebecor Inc.'s Videotron as a viable fourth national carrier, which has begun taking market share from larger competitors. Additionally, recent reductions in federal immigration targets have been cited by these providers as contributing to stagnated customer acquisition.
Historically, certain key areas such as media and sports have served as diversification avenues for Canada's primary telecom companies, which have acquired significant stakes in television and radio stations, along with ownership interests in sports franchises. However, there is a growing chorus of voices advocating for enhanced participation in the tech sector. For instance, Bell Canada has publicly committed to transitioning into a firm that prioritizes technology services, moving beyond its core telecommunications offerings.
This ambition is reflected in Bell's recent strategic maneuvers, including the launch of its services brand Ateko and the establishment of six new AI data centers aimed at creating Canada’s largest AI compute project. Desjardins analyst Jerome Dubreuil highlighted that investing in sovereign AI, where companies build and operate their own AI systems, is becoming a noteworthy trend among telecom operators, which are increasingly seeking growth in partnership with local businesses that also leverage telecom services.
As BCE Inc. (Bell's parent company) expands its technological portfolio, it has concurrently reduced investments in non-core sectors. For example, it divested its stake in Maple Leaf Sports & Entertainment to Rogers Communications Inc. and reorganized its media division by selling off 45 radio stations and ceasing various TV news broadcasts. Other major telecom firms are also streamlining their operations by exploring the sale of minority stakes in non-essential assets like wireless towers, illustrating a broader trend of divestment aimed at lowering costs and debt burdens. Pogorel noted that such divestments have become a pressing global trend, as operators generate capital through tower sales that can empower expansions into adjacent sectors.
The transition of major telecom operators towards more software-centric business models signifies a broader paradigm shift in the industry. Erik Bohlin, chair in telecommunication economics, policy, and regulation at Ivey, suggested that while telecom companies navigate this transition, they must not overlook the importance of continued investment in their core networks. The pressures faced by these companies highlight their critical role in society, providing essential connectivity services that are indispensable for various sectors.
Telus Corp. is another telecom company moving towards the tech domain, with plans announced to establish two new AI data centers, reflecting its transformation into tech services. Carlos Cabrero, director of customer experience excellence for Telus Agriculture and Consumer Goods, noted that both agriculture and health sectors stand to benefit significantly from technological innovation, areas that have historically been underserved.
In conclusion, while the Canadian telecom landscape is evolving and exploring opportunities beyond traditional boundaries, it is essential that these firms strategically balance their growth ambitions with the need for bolstering their foundational telecom infrastructure.
