Public Mobile is gearing up to participate in Ottawa's coming auction of wireless spectrum – an apparent about-face that suggests the explosive popularity of data-hungry smartphones is spurring the wireless upstart to revise its business plan.
Chief executive Alek Krstajic confirmed that turnabout on Tuesday after previously telling analysts that Public Mobile would likely sit out the auction of the highly-desired 700 MHz frequency next year. In February, he had reasoned that spectrum would be costly and Public Mobile, with its focus on low-cost talk-and-text plans, could survive without investing in a pricey mobile broadband network.
But the surging popularity of smartphones among Public Mobile's customer base, especially Android-powered devices, is prompting the carrier to introduce new services to fuel wireless data growth. That includes the introduction of a new digital music service – that Mr. Krstajic said is designed to up the ante on the Big Three incumbents rather than just other upstarts.
"I think there is a very, very good play for new entrants. So, yes, I think you will see us in the 700 MHz auction," Mr. Krstajic said at press conference in downtown Toronto.
"What were are trying to do right now is understand what blocks we want to go after, what kind of budget we think we need to put together and so on."
Mr. Krstajic said his team decided to change course after reviewing Ottawa's auction policy, which was announced in March. Rival new entrant, Mobilicity, also plans to be a bidder. Wind Mobile, meanwhile, is widely expected to participate but has been circumspect about its plans.
The 700 MHz band is sought after by carriers because it is low-frequency spectrum that is well-suited to support explosive mobile data growth on smartphones and tablet computers. With Canadians talking less on their mobile devices, data is seen as the key to driving higher revenues – even at the low-end of the mobile market.
Smartphones already represent 45 per cent of the Canadian mobile market and it is estimate that the average smartphone uses 35 times the bandwidth of a regular cellphone. (A tablet, meanwhile, uses up to 121 times the bandwidth.)
For its part, Public Mobile has largely focused on attracting customers who've never owned a cellphone; so-called cordcutters eager to ditch their home phones and value-conscious consumers who've grown weary of the relatively high prices offered by the Big Three.
"I thought the talk-and-text model, which is what that was, would last us for three or four years. Very quickly we realized the market is moving quickly and we started to launch data services," Mr. Krstajic said.
He also noted that Android smartphones are increasingly becoming hot sellers with its target customer base, representing roughly 40 per cent of new sales: "We are starting to see the sales of our Android phones go through the roof."
Public Mobile is not the only new entrant that has tweaked its business model in recent months. Rival Wind Mobile, for instance, has shifted its strategy to focus on post-paid customers – or those who pay their bills at the end of the month and are more apt to use more data.
After a sluggish first-quarter, Mr. Krstajic said Public Mobile is eager to fuel more subscriber growth during the second half of this year by differentiating itself from its competitors. In that regard, the company has launched a new unlimited mobile music service called Siren ahead of the pivotal back to school season.
Mr. Krstajic said the service, which is only available on Android devices, is similar to the iTunes model whereby downloaded songs are stored on the handset. The Siren service is based on flat-rate pricing plans that include unlimited talk, data, text and music.
The services results from the company's new partnership with Universal Music Canada, Sony Music Entertainment Canada Inc., and Warner Music Canada. Subscribers have access to more than a million songs, but that number is set to increase to 5 million by late September or early October, Mr. Krstajic said.
"We are trying to change the music model and put it on its ear a little bit," he added. "So no more is there downloading songs at $1 a song from iTunes or $10 an album plus. And then on top of that as you are downloading that song, you are paying data (charges) to the carrier that you are with. So you are really getting hit twice."
He expects the Siren service to prove popular with youth, new immigrants and other consumers who lack a credit history in Canada because it is available to those without credit cards, computers or costly devices like iPhones and iPads.