THE impact of the potential arrival of American giant Verizon in Canada's cellphone market has left analysts divided, with some seeing benefits for consumers and others a lot of negatives.
Verizon, the largest American carrier, has almost 100 million subscribers, easily dwarfing the combined 25 million held by Rogers Communications, Telus Corp. and Bell Inc.
News that it was in the market for some of Canada's smaller players sent the shares of the big three Canadian companies tumbling Tuesday.
National Bank analyst Adam Shine called pullback in share prices a likely "overreaction," but said he expected some "acute" cost-cutting, including layoffs, as the Canadian firms move to deal with a big new competitor.
"This will mean significant layoffs which could easily trump the hiring to be done by Verizon, which besides a needed presence in retail outlets, should be able to initially handle a lot of functions (marketing, billing) from the United States," Shine said in a research note.
Shine also said the arrival of Verizon could also mean fewer low-cost monthly plans for cellphone users amid new-entrant consolidation, adding the price of Verizon's arrival "may ultimately prove expensive for Canada."
But U.S.-based Edward Jones analyst Dave Heger said the entry of Verizon as a fourth, large player would likely be positive for consumers.
"I certainly think Verizon would try to be competitive and creative with pricing plans," Heger said from St. Louis, Mo. "Somebody like Verizon would have a better chance of making a go of it than a small startup."
"Certainly, the Canadian government has made it clear they'd like to have a fourth competitor in each geographic area," Heger said.
The Globe and Mail has reported Verizon has made an initial $700-million offer for Wind Mobile and is starting talks with financially struggling Mobilicity. Both small carriers have just over 850,000 subscribers between them.
Verizon refused to comment Wednesday on its possible entry into the Canadian wireless market.
-- The Canadian Press