The three major players in Canada's multi-billion-dollar wireless communications sector - Telus Mobility, Rogers Wireless and Bell Mobility - quietly reviewed their products for more than a year to get ready for last month's launch of Virgin Mobile Canada, according to an industry analyst.

"Virgin's arrival has definitely had quite the effect on the entire industry," says Amol Shah, a telecom analyst with consulting firm IDC Canada in Toronto. "Everyone has been forced to look at their marketing and products to become more competitive."

Virgin Mobile Canada is a $150-million joint venture between Bell Mobility and the British-based Virgin Group. Under the deal, Bell Mobility provides the network in Ontario and Quebec for Virgin's prepaid cellular phone packages, which are aimed mostly at the youth market.

The agreement is similar to an arrangement Virgin made with Sprint PCS when it launched in the United States in 2002.

Industry analyst Amol Shah, above left, sees Andrew Black’s Virgin Mobile Canada (below) as a force in the budding cellphone wars.

"It's been a lot of fun so far and we can't wait to continue building the momentum we've established," says Andrew Black, president of Virgin Mobile Canada. "We believe that young people have been taken for granted in this country for far too long. They need products that are affordable and fun to use.

"We've gotten some excellent feedback so far from our customer base," says Black, who adds that he believes in informal discussions with customers. "You take a formal focus group and everyone is all nervous about talking. It might take a month to get the results back. I believe companies don't get out and talk to their customers enough."

Shah says Virgin's arrival is timely since only about 50 per cent of Canadians use cellphones. "In some European countries the penetration rate is about 80 or 90 per cent. We have a lot of room for growth here."

About 15 million people now use cellular phones in Canada, according to the Canadian Wireless Telecommunications Association (CWTA). There were 1.5 million new subscribers in 2004, of whom an estimated 660,000 were added during the fourth quarter.



Shah says wireless carriers are also looking at generating income through new revenue streams such as text and picture messaging, also known as multimedia messaging service.

"That's something in other countries that Virgin has been very good at," Shah says. "They will likely be promoting at least the text messaging very heavily here to try and repeat that success."

Canadians sent more than 710 million text messages last year using their cellular phones. That's up from 352 million in 2003 and 174 million in 2002, according to the CWTA.

Text messaging began gaining popularity in Canada in 2002 when Bell Mobility, Telus Mobility, Rogers Wireless and Microcell's Fido signed an agreement to permit message exchanges between each other's customers, Shah says. Rogers bought Microcell last year, but retained Fido as a separate branded product.

Another inter-carrier agreement will take effect later this year that allows multi-media messages such as photos and short video and audio clips to be exchanged.

Earlier this year, Telus Mobility introduced a specially designed cellphone that can make text messaging easier. The Fastap handset wraps alpha keys around the standard numeric keyboard.

Internal analysis by Telus showed clients who upgraded to Fastap sent an average of 120 per cent more text messages than those with conventional phones, company spokesman Mark Langton says.

Langton says Telus welcomes the latest competition from Virgin, and adds that sales and penetration rates increased for everyone when Telus entered Eastern Canadian markets several years ago because of greater awareness for the products. "We've consistently seen that more choice in wireless always raises overall wireless sales."

Rogers Wireless introduced two phones last month that are designed to encourage sending video, photos and text messages between users.

The Treo 650 Smartphone has e-mail capabilities, and a built-in Palm Organizer and MP3 player.

The Audiovox SMT 5600 model has a camera and can send e-mails. It also includes "pocket versions" of software such as Microsoft Outlook and Internet Explorer.

"It all comes down to choice and what features the consumer wants in a phone," says Rogers spokeswoman Suzanne McMeans.

Virgin might be a direct competitor for Bell, but Canada's largest phone company is still happy with the new partnership.

Bell's arrangement with Virgin is a "win-win situation for everyone," says Bell Canada spokeswoman Nessa Prendergast.

"We believe the consumer will be better served by having more choice out there," she says. "That's what's most important to us."

Bell and Rogers retain one distinct advantage over Virgin, Shah says, since they can bundle cellphone service with packages that include cable television and Internet.

The market could change later this year, however, if the Canadian Radio-television and Telecommunications Commission decides to allow portability, which permits consumers to keep their cellphone number when they switch carriers.

That makes it easier to change service providers because customers can keep their existing telephone numbers.

"That will throw everything off.”

Shah says. "It would be a whole new ball game."

The CRTC is scheduled to look at the issue later this year, although the federal government recently urged the commission to "move expeditiously to implement wireless number portability."

Telus Mobility's Langton says the company will participate in the CRTC review. He adds that such a change has been a "costly and lengthy process" in other countries such as the United States.

The costs of designing new systems and working out the necessary inter-carrier agreements can wind up costing consumers extra, he says. The costs can come in the form of a user fee for people who switch carriers and want to keep their phone number. In the United States, an extra charge is added to all cellphone users' monthly bills.

McMeans says Rogers customers have not been asking for wireless number portability, but the company will co-operate with the CRTC review.

Black adds Virgin could not wait for a decision on portability. "It all comes down to choice for the consumer so they aren't locked in to anything.

"Expect the unexpected," Black says. "This is going to be fun and interesting."

(David Hatton can be reached at hatton@businessedge.ca)