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Telcos need to act on consumer dissatisfaction

By November 1, 2013January 12th, 2016Loyalty and retention

By Sam Puchala,
Principal, SATOV Consultants

Foreign investors may have retreated for now but SATOV study shows Canada’s telcos are vulnerable to new entrant

Most Canadian wireless customers are at least somewhat unhappy with their current providers and would consider jumping ship if a foreign company opened up shop in Canada. According to a recent survey by SATOV Consultants, 76{a23d3e3aff46d689b50c88cc1d7606a7a28ed4b695b585c6bb0ea43784184748} would be open to a strong new player.

Those Canadians were deeply disappointed, then, by the recent decision Verizon made not to expand into Canada. The recent acquisition of Public Mobile by Telus eliminates another possible target for foreign entry. And since all 14 spectrum auction bidders are Canadian, the threat of outside investors seems to have abated. But this may not always be the case.

Verizon seemingly had better prospects than the 20{a23d3e3aff46d689b50c88cc1d7606a7a28ed4b695b585c6bb0ea43784184748} of the Canadian market it was expected to gain. When you consider it could stay put and try to increase its U.S. market share by just 1.5 to 2{a23d3e3aff46d689b50c88cc1d7606a7a28ed4b695b585c6bb0ea43784184748} for the same net results, Verizon’s reasoning for staying out of Canada becomes clear.

Still, the simple act of Verizon ‘kicking the tires’ on an acquisition of Wind Mobile and a spectrum bid did get Canadian consumers excited. Not surprisingly, existing pricing was complaint number one on the list of consumer issues. Wireless users want a comprehensive plan for less than $70 per month that covers unlimited nationwide calling, unlimited text and at least 1GB of data. The current rates are $75 to $80.

The survey also revealed that even if Verizon chose not to offer discounted services, 20{a23d3e3aff46d689b50c88cc1d7606a7a28ed4b695b585c6bb0ea43784184748} of Canadian consumers would still have switched, speaking to dissatisfactions including network availability/reliability and customer service.

Notably, willingness to switch was not due to positive brand perception of the U.S. company, but to dissatisfaction with Canadian choices. Of the Canadian Big 3, TELUS fared better than Bell and Rogers. Survey results indicate TELUS is perceived as ‘friendlier’ and as having better customer service.

Spectrum of possibilities

If Verizon or another company opens up in Canada before customer satisfaction with the incumbents is addressed, the new entrant will be poised for success.

The only way a foreign player can compete is by participating in a spectrum auction; even acquiring a small Canadian carrier would not give the buyer enough spectrum to be effective, and purchasing more than one Canadian carrier would be a complex endeavour.

That means recent developments give a little breathing space for Bell, Rogers and TELUS, but questions remain for them: What will they do to restore confidence among frustrated customers? How will they rise to meet price and service expectations? And can Bell and Rogers catch up with TELUS, before a fourth player steps in?