Rogers Communications is implementing a price hike of $5 more a month for new and renewing contract subscribers, a hike the country’s other big cellphone providers, Bell and Telus, have introduced because of the falling loonie, which the three claim has inflated costs.
“[There is] a substantial price increase coming next month,” Robert Bek, analyst at CIBC World Markets said Wednesday.
The average monthly bill for a Rogers customer is around $60, an amount similar to what Bell and Telus collect each month from their subscribers.
A customer whose bill comes in around that sum can expect to pay 8.3 per cent more per month — the equivalent of another $60 payment to Rogers annually.
“The price increase isn’t substantial. I would describe it as an appropriate level,” Guy Laurence, the CEO of Rogers said on a conference call Wednesday.
“I think it’s pretty clear across the industry that with rising costs, prices are going to go up,” Laurence said.
Existing customers won’t get hit with the hike unless they renew their contract, or switch to one of the other major providers.
But some industry watchers are skeptical, noting the big telecoms tend to have methods to protect themselves from foreign currency fluctuations. More importantly, the percentage of the carriers’ total costs that are paid in U.S. dollars may not be as significant as some claim.
“We estimate that [U.S. dollar] denominated costs represent less than 10 per cent” for Rogers, Bell and Telus, respectively, Aravinda Galappatthige, a telecom analyst at Canaccord Genuity said in Jan. 19 research note.
Galappatthige did note Apple and other handset makers are increasing prices for their devices because of the lower currency.
Telus has levied a $5 rate hike as of Jan. 21 partly because it has to pay more for network components bought from foreign firms in U.S. dollars, said Emily Harner, a company spokeswoman.
Geoff White, counsel to the Public Interest Advocacy Centre, suggested the rate hike by all three carriers is more motivated by a desire to pad profit margins rather than recover costs. Each company engages in hedging strategies to cover their exposure to currency fluctuations, he said.
“It’s a little suspicious that these big, sophisticated, publicly traded companies that are in the business of managing their risk and maximizing profit are blaming something that they likely foresaw,” he said.
A spokesperson for Bell said its hedging costs have risen “dramatically” as the dollar has continued to drop and currency contracts are renewed at a higher cost.
Interestingly, the $5 price hikes from the major carriers won’t be applied in Quebec, Saskatchewan and Manitoba, where regional competitors Videotron, SaskTel and MTS exist.
Canaccord’s Galappatthige suggested the hikes are more likely an attempt to move pricing up after a period of discounting and promotional activity by the big three that stemmed from relatively new rules that cap contracts at two years.
The move created a “double cohort” of subscribers who were looking for new plans. Many were offered better deals by their carrier to stick with them.
“We think the rate increase has more to do with offsetting the elevated promotions and retention costs we saw through the double cohort period,” the analyst said.
Here’s a look at how existing rate plans compare:
— With files from The Canadian Press