TORONTO – When it comes to competition between Canada’s telecommunications giants, there are certain spaces where carriers have traditionally jostled with one another to emerge as the top dog.
In any given quarter, the providers strive to gain the most new cellphone and internet subscribers, often through promotions or bundling opportunities. Customers are also accustomed to boasts about performance on metrics like broadband speed, call reliability or total network coverage.
But as the telecoms continue to set their sights on growth and profits, some industry watchers say they will need to further diversify their investments. They point to technology services, including artificial intelligence, as an industry where telecoms can make their mark.
“The big innovation comes from tech. The dream of service telcos is … to behave like tech people,” said Gérard Pogorel, an economics professor at France’s Télécom Paris institute.
“The idea is to move from ‘telco to tech-co.’”
Pogorel was among a half-dozen international experts who spoke last month at a telecom seminar in Toronto hosted by the Ivey Business School. The event focused on the role of innovation for telecom policy, along with harnessing new technologies for economic growth at a time of disruption and geopolitical challenges.
Peter Cramton, an emeritus professor of economics at the University of Maryland who also spoke at the event, said big tech companies have outperformed telecom carriers globally over the past decade by “expanding across domains” to achieve exponential customer growth.
“Whereas the big (telecom) carriers have struggled with, ‘Well, we’ve got our customers, but now we’ve got 100 per cent penetration, so everybody is a customer and we can’t expand the number of customers exponentially,’” he said.
“But I think there’s lots of scope for this ‘telco to tech-co’ transition, creating a lot of value for the big carriers that we haven’t seen so far.”
The Big Three providers have faced a “double whammy” hampering traditional telecom subscriber growth, said Dave Heger, a senior equity analyst at Edward Jones.
Consumer prices have been declining amid the rise of Quebecor Inc.‘s Videotron to become a fourth national player, taking market share away from the other three.
The federal government also recently scaled back its immigration targets — a change cited by the major providers as a key factor holding back customer additions in recent earnings reports.
SHIFTING ASSET MIX
Media and sports have long stood as key areas of diversification for some of Canada’s dominant telecom companies, who over the years scooped up major television and radio stations across the country, along with ownership stakes in professional sports teams.
However, some are heeding calls for a stronger presence in the tech space. Bell Canada, in recent years, has vowed to transform into a company that focuses primarily on tech services, beyond core telecom offerings.
That’s been backed up by a slew of announcements lately, including the launch of its services brand Ateko, which unified recently acquired tech companies FX Innovation, HGC Technologies and CloudKettle under a single umbrella.
Bell is also making artificial intelligence a cornerstone of its growth strategy, announcing last month it will open six AI data centres as part of a plan to create the largest AI compute project in Canada.
Investing in sovereign AI — when an entity builds and operates its own AI systems — has become “an emerging theme for telcos,” said Desjardins analyst Jerome Dubreuil in a research note.
“Canadian telecoms are looking for new areas of growth, and data centre operations may help if Canadian organizations are looking to partner with local operators that can also offer telecom services,” he wrote last month.
THE PERKS OF ‘TRAVELLING LIGHT’
While Bell owner BCE Inc. expands its tech portfolio, its investments in other non-core areas have waned. In addition to divesting its stake in Maple Leaf Sports & Entertainment to rival Rogers Communications Inc., the company also shook up its media division last year, selling off 45 radio stations while ending some TV newscasts.
Other major telecoms are also shedding assets as they look to reduce costs and shrink their debt. Telus Corp. has said it is exploring the sale of a minority stake in its portfolio of wireless towers, while Rogers is in the midst of selling a minority stake in a portion of its wireless network infrastructure.
Pogorel said divestment of physical resources by telecom operators has become a “massive phenomenon” internationally. By generating cash through the sale of towers, it creates new opportunities to expand into adjacent, non-traditional sectors.
“This opens space for innovation,” he said, noting that in France, two-thirds of mobile towers are no longer the sole property of telecom companies. That figure stands at 79 per cent in Finland and 68 per cent in Ireland.
“This is good for their balance sheet,” Pogorel said.
“A purely service telco travels light. It doesn’t have the burden of multibillion-dollar infrastructure. Travelling light, they … are more able to innovate.”
PARADIGM SHIFT
The big telecom companies “are in kind of a transition phase,” said Erik Bohlin, Ivey’s chair in telecommunication economics, policy and regulation.
“These big telcos are moving away from their infrastructure to becoming more and more software companies,” he said in an interview.
“The very cherished idea in Canada … that infrastructure competition is the name of the game, that might be tapering off just because of what is going on in technology.”
Telus, which also announced plans last month to open two new AI data centres, has undergone a transition of its own into the tech services space, said Carlos Cabrero, director of customer experience excellence for Telus Agriculture and Consumer Goods.
“My non-Canadian friends often ask me, ‘What the heck is a Canadian telco doing in the agriculture space?’” he said at the Ivey event, where he also highlighted growth of the company’s Telus Health subsidiary.
Cabrero said both agriculture and health are industries “historically underserved from a technological perspective.”
“I think there’s a lot of innovation that can happen within these industries by leveraging what Telus’ core competency is, which is technology and … communication,” he said.
Forays into tech, like those made by Telus, have the potential to add growth opportunities that are “over and above what’s available to them in the telecom industry,” said Heger in a phone interview.
“They’re certainly looking beyond just the traditional telecom business as a way to add value and add some diversification.”
BALANCING ACT
Bohlin praised the carriers’ ambition, but said expectations should be tempered as they test out new waters.
He said it’s unlikely Canadian telecoms will become global leaders in producing AI software, compared with that sector’s already dominant players.
“There are plenty of opportunities here, but it’s not like a gold mine,” said Bohlin.
“I think those are new kinds of meaningful diversification, but it’s not … propelling growth in the same way as the mobile revolution when everybody wanted the mobile phone.”
But that doesn’t mean they can’t carve out a niche, Bohlin said, such as by leveraging their “core competency” — delivering connectivity.
He said they should increasingly seek to partner with other businesses in need of connectivity solutions in fields like agriculture and mining, along with developing Internet of Things applications that rely on connectivity to function.
As the carriers chase new customers in diversified fields, that also shouldn’t come at the expense of much needed investments in their core telecom networks, said Bohlin.
“The telcos are in a very important role for society but they are being pressured from all directions,” he said.
“We take for granted the many ways these telecom networks will work.”
This report by The Canadian Press was first published June 8, 2025.
Companies in this story: (TSX:BCE, TSX:T, TSX:RCI.B, TSX:QBR.B)
