YEAREND REPORT

DESPITE the return of a duopoly, small telecom companies can still carve out their share of the market with broadband promising to shape the future of the industry.
Karla Lizardo, research manager of XMG Global said it is not “too late” for San Miguel Corp.’s wi-tribe Inc. and Lopez-led Bayan Telecommunications Inc. to compete with the Big Two of Philippine Long Distance Telephone Co. and Globe Telecom Inc.

PLDT earlier acquired third-ranked Digital Telecommunications Philippines Inc., giving the combined entity a 70-percent share of the market, leaving Globe with the remaining 30 percent.

“The Philippine broadband market is still unfolding. The mobile telecom market has a very different dynamic compared to Internet. Unlike mobile, Internet penetration is only at about 30 percent of the population but has been growing in the past decade,” Lizardo said. 

“There is still room for new players. Broadband is a growth market and companies have long foreseen the opportunities in this segment,” she said.

More than price wars
Lizardo said competition would heighten, and move beyond price wars.

“XMG sees competition more focused on service speeds and reliability. Those who would be able to provide the best combination of speed, reliability and price will arrive at the forefront of the market,” she said.

The analyst said the broadband market is at a point of maturity where cheap does not necessarily mean winning more market share.

“XMG sees the broadband market outlook as positive. With the continued price declines of voice and SMS, telecom companies are looking more and more into increasing their broadband revenues,” Lizardo said. 

XMG expects broadband consumptions in the Philippines to increase 27 times by 2015.

According to a study done by Ovum, mobile and fixed broadband service in the Philippines remains a luxury for majority of Filipinos despite falling prices. The study found that the Philippines and Malaysia had the lowest broadband tariffs, but affordability remains an issue for consumers.

Entry-level worldwide interoperability for microwave access services in the Philippines costs as much as $223 a year for wi-tribe.

Globe’s entry-level high speed packet access service was the most affordable in the Philippines, costing $1.28 per 100 megabytes.

Ovum said the broadband services using HSPA technology were the cheapest option for entry-level users, with an average global price of $223 a year.

Gamaliel Cordoba, National Telecommunications Commission chief agreed that broadband was the next growth area for the industry. He projected the number of broadband service subscribers will continue to register three-digit growth in the next two to three years.

Aggressive offering
In a bid to entice and snatch more subscribers, wi-tribe recently offered the lowest prepaid Internet broadband service at P25. At present, rivals Smart Communications Inc. and Globe offer one-day unlimited Internet for P50.

Edmund Pike, wi-tribe head of products, said the company’s strategy is to become the most preferred broadband service provider in the country.

He said the company is confident that it would meet the 100,000 target subscriber base for the year from the end-June’s 80,000.

“For next year, we expect to double our subscriber base,” Pike said.

Wi-tribe recorded a P389 million revenue in the nine months ended September, 241 percent higher than the previous year’s P112 million.

Bayan meanwhile is focusing on wired business, particularly digital subscriber lines (DSL), corporate data and carrier data after it sold its wireless landline assets to Multimedia Telephony Inc.

PLDT to emerge as winner
Lizardo however admitted that PLDT is clearly in a good position to compete as sustainability is always a good issue during price wars.

“But opportunities for other players to increase their broadband revenues still abound,” she said. 

At present, the PLDT group’s total broadband subscribers stood at 2.3 million. The company’s total broadband and Internet revenues totaled P13.9 billion, a 10 percent growth year-on-year.

Napoleon L. Nazareno, president and chief executive of PLDT and Smart, said the company is focusing on its broadband business with the declining yields of its mobile phone business brought about by the unlimited services.

He said that Smart continues to invest in its cellular and multi-platform broadband networks while upgrading its existing transmission, core and access facilities.

Smart now has over 3,000 HSPA base stations and 1,200 HSPA+ base stations, more than double the 500 base stations in early September. The base station upgrades are part of the P67 billion system-wide network transformation program being undertaken by the PLDT group.

The program also involves the upgrading of other elements such as mobile switches, fiber optic backbone networks, and international cable systems, among others. For its part, Globe is spending $790 million for network modernization to prepare for more bandwidth-heavy services such as broadband and data.

Globe said the massive modern network rollout is expected to provide subscribers with a more stable and reliable network coverage nationwide, giving them an unparalleled service experience when they text, call or surf on their mobile phones.

“Mobile browsing has definitely revolutionized the Philippine telecommunications industry with the growing demand for an easier and more accessible way to be connected to the World Wide Web,” Ernest Cu, president and chief executive of Globe said.

At end-September this year, the company’s mobile browsing revenues rose to over P1.4 billion, a 64-percent increase from last year’s levels.

The company’s fixed line and broadband revenue amounted to P10.83 billion in the first nine months, up by 17 percent compared to the same period last year.

Globe’s total mobile and fixed broadband subscribers stood at 1.4 million. At end-September, Globe had a total of 12,062 base stations and 6,580 cell sites to support its 2G, 3G and WiMAX services.