Trajectory for growth

A recent report from Desjardins Capital Markets looked at changing demographic trends that could impact the trajectory for growth in Canada’s mobile marketplace.

Last March, Statistics Canada reported that Canada’s population grew by over 1 million people in 2022, the first time that a 12 month period recorded a 7-digit growth in population. Canada’s population was estimated at 39,566,248 on January 1, 2023.

Three months later, in June the agency reported that Canada’s population reached 40 million, and noted that international migration accounted for nearly all (96%) of the growth recorded in 2022. “While several countries are bracing for the impacts of population decline, Canada continues to lead the G7 when it comes to population growth.” By the end of September, Canada added more than another half million people to reach 40,528,326, representing 12-month growth of 1.25M people, a growth rate of 3.2%.

In a post last November, I discussed the importance of understanding some basic demographics in order to analyze economic indicators for the telecom sector. Desjardins’ January 7 note locked in on an observation by Statistics Canada attributing so much of Canada’s recent accelerated population growth on the number of non-permanent residents. “From July 1 to October 1, the country saw the number of non-permanent residents continue to increase; the total non-permanent resident population increased from 2,198,679 to 2,511,437.” This net increase of 312,758 non-permanent residents was the greatest quarterly increase since such data started getting collected more than 50 years ago.

Desjardins notes that it is not clear how to predict that trajectory for growth in the future. “We anticipate that population growth will continue to be strong relative to other developed countries but highlight the risk that the current pace of population growth might not be sustained over the long term.”

Desjardins estimates that growth in non-permanent residents of Canada was responsible to 30-45% of Canada’s wireless net additions last year, “outpacing our estimate of 25‒40% for penetration increases and 25‒30% for growth in the number of permanent residents.”

Since there is pressure on revenues per customer (ARPU), overall wireless service revenue growth is even more dependent on subscriber growth. Population growth contributes significantly to subscriber growth. At the same time, strong population growth is seen as likely contributing to ARPU pressure “as companies tend to discount more aggressively when there are more consumers actively shopping in the market”.

On the flip side, population growth has been blamed for driving Canada’s skyrocketing costs of housing.

Canada’s high population growth rate is an outlier among our peer economies, significantly exceeding the rates in all of our G7 partners. Beyond housing, there are impacts on infrastructure, including telecom networks, and the delivery of public services. A January 10 report from Desjardins found “closing the door to temporary newcomers would deepen the recession expected in 2024 and blunt the subsequent recovery.”

One of my first jobs coming out of school looked at population modelling, driving spending requirements for local telecom investment.

Understanding the impacts of population shifts is important. How will changes in public immigration policy impact the macro and micro economics of Canadian telecom?

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