Experts doubt the link between price increases and the loonie telecoms

trois-grands-fournisseurs-services-sansConsumers looking for new cell phone plans should expect to pay a little more each month if they choose to become a customer of one of the three major telecom groups in Canada, as Telus, Rogers and Bell recently announced price increases by attributing them to the weak Canadian dollar.

But some industry observers are skeptical and rather make out that the major telecommunications companies usually use other methods to protect against fluctuations in exchange rates.

“If the exchange rate is so important, why have we not seen price declines when the dollar was high?” Asked David Christopher, a spokesman for the OpenMedia consumer advocacy group.

Consumers who engage in new contracts with Bell (T.BCE), Rogers (T.RCI.B) and Telus (TT) must now pay $ 5 more. Each company also reduced by between $ 10 and $ 15 savings offer for new customers who already have their own mobile device.

Telus increased its price especially because the company has to pay more for certain components of the network due to the weak Canadian dollar, explained Emily Harner, a spokesman for the service provider. She also mentioned the need to spend millions of dollars each year to continue to meet consumer demand for wireless data.

The other two companies discussed the concerns about the economy. For months, the loonie is trading below the 80 US cents, and he stands in recent weeks around 70 cents US.

The companies could raise their prices to offset the additional costs of their activities. They cover almost all their infrastructure costs in either US dollar or euro, said Iain Grant, managing director of SeaBoard Research, a technology research and strategic consulting company.

But some believe that consumers are misled by companies that make them believe that the loonie is responsible for the rise in prices of cell phone plans when in fact it is the desire for more juicy profits that is responsible.

“It is a little suspect that these large public companies, sophisticated, accustomed to manage risk and maximize profits lay the blame on something they had anticipated for a likely price increase, widespread in a period of time relatively short, “said Geoff White, outside counsel for the Center for the Defense of the public interest.

The three companies are protected by a hedging program for exchange rates, he continued, according to the analysis of their annual declarations 2014 and their most recent reports on third quarter results.

“(These hedging programs) return to lengthen a premium to reserve a certain exchange rate in the future, so be sure to pay a certain amount,” said Mr. White.

It is impossible to know to what extent these initiatives have been successful from the information contained in these reports, he continued, but “it seems that they have managed to do that quite effectively.”

But Mr. Grant said that when the forecasters believe the dollar will remain weak vis-à-vis the US dollar for a longer period of time, “currency swap options are more limited” and expensive.

“The cost of these hedges also increased significantly with the dollar decline,” noted a spokesperson for Bell, Jason Laszlo. Telus and Rogers have not responded to questions about their coverage program for exchange rates.

The companies would also have chosen to lay off employees or to reap big profits least until the loonie takes the better, said Mr. Grant.

They chose instead to pass the buck to consumers, a move that is likely to add to corporate profits.

“Price increases (are favorably received by) financial analysts, which usually leads to share price increases,” said Mr. Grant.

In addition, these simultaneous price increases appear to reflect a trend that Canadians are used to, said Mr. Christopher, regardless of where the dollar is. The three telecommunications giants had also increased the prices of their monthly plans for new customers in the space of two months in 2014.

The three major wireless service providers can do so without suffering the consequences due to the lack of competition in most provinces and territories, he said. In Quebec, Saskatchewan and Manitoba, where a fourth company provides wireless services, companies have not announced such price increases.

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