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Wireless subscribers expected to lead growth at Canada's big telecoms

MONTREAL - Canada's big telecom companies are prepared to deal on price if it means keeping their customers holding a bundle of services — wireless, Internet and TV — and away from the competition.

The more services consumers have, the more negotiating power they potentially have, say analysts, who track customer retention.

"It's far more lucrative for the telecom company to keep you there for the third or fourth service," telecom analyst Troy Crandall said Tuesday.

It cuts down on marketing, service and installation calls, he added.

Bell (TSX:BCE) reports its fourth-quarter earnings on Thursday, followed next week by competitors Rogers (TSX:RCI.B) and Telus (TSX:T). They compete every quarter to see which company turns in the best performance on wireless, Internet and TV customers.

The big three's wireless divisions are expected to lead contributions to earnings again this quarter, thanks to smartphones and their owners who surf the Internet and use mobile apps.

Even if mobile phones aren't part of a consumer's bundle of telecom services, they can still negotiate discounts, said Crandall, of Montreal investment firm MacDougall, MacDougall & MacTier.

But lowering a cellphone bill usually depends on how long you've been a customer, how much you spend per month and your credit history, he said.

Analyst Brahm Eiley said even though there are more Internet subscribers added annually than TV subscribers, TV will stay on top for quite some time due to the revenue that it brings in.

"On average, customers still pay more for TV access than Internet," said Eiley, co-founder of the Convergence Consulting Group in Toronto.

The average revenue that a TV customer generates is $60 monthly, compared with $45 for an Internet customer, he said.

But Crandall said more consumers wanting high-speed Internet and increased capacity will drive growth for Internet service.

In the U.S., high-speed Internet services represent the fastest growing and most profitable line of business for cable companies, edging past TV packages. But more American consumers have dropped their TV service in favour of online subscription service Netflix and others.

But like wireless, TV service is competitive in Canada with deals and promotions to get customers to switch providers.

For example, Fibe TV, Bell's Internet protocol television service, has been competing aggressively for customers.

Competitors Rogers, as well as Videotron (TSX:QBR.B) and Cogeco (TSX:CCA) have taken note of Bell's drive to woo customers to its IPTV service with deals.

Again, having a bundle of services can help to renegotiate the price of a consumer's monthly TV bill.

"It's like shopping at Costco. If you buy more, you get a better deal. For a majority of households that's meaningful at the end of the day," Eiley said.

Meanwhile, Bell is expected to report 70 cents of adjusted earnings on revenue of $5.414 billion in the latest quarter, according to analysts polled by Thomson Reuters.

Rogers reports on Feb. 12 and is expect to have 75 of earnings per share (options expense excluded) on $3.309 billion in revenue. Telus reports on Feb. 13 and is expected to have 47 cents in adjusted EPS on $3.014 billion in revenue.

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