Tucows 2013 Annual Report Download - page 22

Ting may face competitive pressure to reduce prices for our products and services, which may adversely affect our
profitability and other financial results.
As competition in the U.S. wireless communications industry has increased, providers have lowered prices or
increased the number of minutes available under monthly service plans to attract or retain customers. To remain competitive
with existing and future competitors, we may be compelled to offer greater subsidies for our handsets, reduce the prices for
our services or increase the minutes, messages and/or data units that we offer under our postpaid monthly plans. Any
subsidies or price reductions that we offer in order to remain competitive may reduce our margins and revenues, and may
adversely affect our profitability and cash flows. Lower handset prices may also make our services more accessible to new,
lower-value customers with less disposable income available to spend on our services. In addition, as handset prices decline
and handsets become more disposable, customers without long-term contracts may change their wireless providers more
frequently, thereby increasing our churn and resulting in higher acquisition costs to replace those customers. A shift to lower
value or less loyal customers could have an adverse impact on our results of operations and cash flows. Those who receive
inexpensive handsets as gifts and are not interested in using our service may fail to return them. As a result, we could lose
our investment in these customers and handsets.
Competition in the wireless industry could adversely affect Ting’s revenues and profitability.
The wireless communications market is extremely competitive, and competition for customers is increasing. We
compete with (1) facilities-based wireless communications providers and their prepaid affiliates or brands, including Sprint;
and (2) other MVNOs.
Most of our competitors have substantially greater financial, technical, personnel and marketing resources and a
larger market share than we do, and we may not be able to compete successfully against them or other wireless
communications providers. Due to their size and bargaining power, our larger competitors obtain discounts for facilities,
equipment, handsets, content, and services, potentially placing us at a competitive disadvantage. As consolidation in the
industry creates even larger competitors, our competitors’ purchasing advantages may increase further, hampering our efforts
to attract and retain customers. Certain of our competitors may also use their ownership of local wireline telecommunications
facilities to introduce service features and calling plans, such as free wireless-to-landline calls, that we are unable to offer at
similar cost. Their larger wireless customer bases may make discounted or free in-network calling (that we do not offer
currently) more attractive than any similar service that we may offer. This may adversely affect our ability to compete against
these competitors in the longer term.
Other prospective entrants in the wireless communications industry, such as cable operators, now offer bundled
local, long distance, high-speed data, and television and video services. The ability of these providers to bundle
telecommunications, Internet, and video with wireless services, as well as their financial strength and economies of scale,
may enable them to offer wireless services at prices that are lower than the prices at which we can offer comparable services.
If we cannot compete effectively with these service providers, our revenues, profits, cash flows and growth may be adversely
affected.
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The blurring of the traditional dividing lines among long distance, local, wireless, video and Internet services contributes
to increased competition for Ting services.
The traditional dividing lines among long distance, local, wireless, video and Internet services are increasingly
becoming blurred. In addition, the dividing lines between voice and data services are also becoming blurred. Through
mergers, joint ventures and various service expansion strategies, major providers are striving to provide integrated services in
many of the markets we serve. This trend is also reflected in changes in the regulatory environment that have encouraged
competition and the offering of integrated services. We expect competition to continue to intensify as a result of the entrance
of new competitors or the expansion of services offered by existing competitors, and the rapid development of new
technologies, products and services. We cannot predict which of many possible future technologies, products, or services will
be important to maintain our competitive position or what expenditures we will be required to make in order to develop and
provide these technologies, products or services. To the extent we do not keep pace with technological advances or fail to
timely respond to changes in the competitive environment affecting our industry, we could lose market share or experience a
decline in revenue, cash flows and net income. As a result of the financial strength and benefits of scale enjoyed by some of
our competitors, they may be able to offer services at lower prices than we can, thereby adversely affecting our revenues,
growth and profitability.
Ting employs a postpaid business model which exposes us to increased credit risk.