An employee works inside a Rogers Wireless retail store in Vancouver, B.C..DARRYL DYCK/The Canadian Press
Financial analysts are perhaps the only people in Canada -- perhaps the world -- who love extra fees on cellphones. Well, let me be a little more precise; they love it when those extra fees make extra money for the companies because that makes extra money for their investors.
But what happens when those extra fees start to lose money for the wireless company by driving customers to the competition?
Companies can get away with those fees when everyone charges them. But last fall, as Genuity Capital Market's telecom analyst Dvai Ghose points out in a research note this morning, the major carriers dropped their "system access fee" and 911 charges.
This took a chunk out of the total amount carriers extract from customers per month, to the tune of $7.50 - $8.00, according to Mr. Ghose. All carriers, consequently, jacked up the base rates by $5.00 to compensate.
But of the three major carriers, Rogers was the only one to go the extra mile and charge people an additional $2.46 - $3.46 for a Government Regulatory Recovery Fee (GRFF), which it stresses "is not a tax or charge the government requires Rogers to collect." Instead, the fee is designed to help the company recoup all the additional charges telecommunications companies are subject to because of their sector's regulated nature (wireless spectrum costs, fees to fund local programming, etc.)
This makes Rogers the most expensive of the three main wireless providers, Mr. Ghose writes.
"Rogers now appears to be more expensive than Bell or Telus," he says.
For a company that has more wireless customers than any other in Canada, this isn't exactly a good thing. From owning 40 per cent of the net new wireless subscribers in Canada, Rogers has now dropped to 31 per cent. That has happened as Bell and Telus launched their shiny new national HSPA+ wireless network, and launched discount brands (Bell has Virgin and Solo; Telus has Koodoo) to compete with Rogers' Fido discount brand.
"Given that Rogers Wireless has lost its obvious HSPA and discount brand advantages over Bell and TELUS, we wonder if it can sustain its GRFF without continued market share loss," Mr. Ghose writes.
Rogers, of course, is still the king of wireless in Canada. It also has more smart phone customers than its rivals (and smart phone users pay heftier monthly fees). So, for investors, Rogers remains profitable. But will it be able to maintain its fee after Telus and Bell have made such a big deal out of dropping their's? And as Wind Mobile and others, such as Mobilicity or Public Mobile, make "simplicity" and a lack of such fees a cornerstone of their marketing campaigns.