CORRECTION: It looks like I goofed in my calculation of wireless capital intensity. I incorrectly divided wireless carriers' revenue by how much they spend on capital investment, rather than the other way around. I feel terrible about the mistake, but it turns out it wasn't so bad after all. After running the numbers correctly, my conclusion - and the headline above - stands nevertheless. Check out the correct figures after the original post, which begins here: One of the chief talking points from Canada's big wireless carriers in their war against the spectre that is Verizon has been investment, as in: check out how much Bell, Rogers and Telus are spending to supply their customers with some of the supposedly best services in the world. Telus, specifically, has played that card, with chief executive Darren Entwistle talking about how the company has "invested" more than $100 billion in Canada since 2000, while the whole industry has contributed about $420 billion in that same time frame. I've tackled those wildly inflated claims before - the $100 billion figure, for example, isn't really "investment" so much as it includes the company's regular costs of doing business. That would include everything from labour to staplers and rubber bands. A small portion of it - less than a third - actually qualifies as proper network investment, otherwise known as capital expenditure, with an even smaller part going directly to wireless networks. Given that, how does actual wireless network investment in Canada compare with the rest of the world? I sat down this past weekend and crunched the numbers from 71 of the biggest cellphone companies in the developed world, spanning 23 countries, and here's what I found: despite the talking point, Canada's wireless investment is in fact nothing special. It's actually thoroughly mediocre.
The measure of such things in telecommunications is known as capital intensity – a ratio of how much money, or service revenue, a company pulls in versus how much it spends on its network. The chart below uses numbers from the latest Bank of America Merrill Lynch Global Wireless Matrix and shows capital expenditure versus revenue across all those carriers and countries as a percentage since 2006. (Check out this PDF for the full data; revenue is generally stated in billions for the carrier’s local currency, while capital expenditure is usually in millions):
As is clear, Canada typically falls in the mid-range, with Bell, Rogers and Telus collectively devoting between six and eight per cent of their revenue on capital expenditure.
Canadian companies do generally rank well in overall telecommunications investment, but much of that spending is going elsewhere – not to wireless. For example, according to Telus’s 2012 annual report (links to PDF), wireless capital intensity was 12 per cent, up from 9 per cent the previous two years (the company does indeed typically spend more than its two rivals). Wireline capital intensity, however, was double that, at 24 per cent.
The point is, when the Big Three talk about how much they’re investing in wireless, it’s important to remember that what they’re actually spending is nothing special from an international perspective.
(Photo courtesy of Girl Gone Geek.)
ADDENDUM: As mentioned above, the properly calculated numbers are below. Here also is the updated PDF source of these numbers. If there are any further errors, I welcome anyone to point them out.