Towards technology-fuelled growth: New services make telecoms and IT closer partners online

The telecoms sector is witnessing a rapid change in technological evolution, as the launch of 4G and long-term evolution (LTE) services gets under way. With the prevalence of smartphones and the popularity of social networking, chatting and online video games, high-speed mobile broadband is expected to see robust growth. The two major operators, the Philippine Long Distance Telephone Company (PLDT) and Globe Telecom, have been modernising and expanding their networks, and launching services based on plans targeted primarily at young, urban Filipinos. The future growth potential of this segment is also attracting new entrants.

NETWORK EXPANSION: Broadband subscribers number around 5m in the Philippines, with telecoms incumbents PLDT and Globe Telecom providing most of the services. Mobile broadband is still in its infancy but is expected to register faster growth in the future. According to a report by PricewaterhouseCoopers (PwC), the number of broadband subscribers is expected to grow at a compound annual rate of 9.6% over the period 2012 to 2016. Most of this growth is expected to be in the mobile broadband segment. Telecom companies are looking to leverage this potential and drive revenue accretion and average revenue per user (ARPU) rates.

Major network expansion initiatives have also been undertaken. Globe Telecom has expanded its 4G network to Makati, Manila, Pasig, Muntinlupa, Mandaluyong, Cebu City, Boracay and Quezon City. The company has been enhancing its fibre-optic capacity to attract subscribers and support revenue growth over the next few years. Rapid network expansion will enable it to handle increasing mobile data traffic efficiently and improve quality of services to customers. Globe Telecom also plans to sell P7bn ($168.7m) worth of retail bonds to fund network expansion and modernisation.

PLDT, through its subsidiary Smart Communications, has also charted ambitious 4G expansion plans. It has drawn up a list of areas to be serviced by the new technology and has launched a wide range of tariff plans, which have been bundled with the Samsung Galaxy S4 smartphone. The 4G network is being expanded to areas including Bohol, Bacolod City, Davao del Sur, Tagaytay City and Ilocos Norte. Smart Communications has issued statements that the company has 1000 LTE cell sites and the number of cities and municipalities covered across the country is around 115.

NEW PLAYERS: Some of the biggest local firms have shown keen interest in the sector. San Miguel Corporation (SMC) is set to expand network coverage and start mobile services in 2013 through a subsidiary. The high telecom industry margin of around 60% has been a key attraction, even though industry ARPUs are low. The company has made acquisitions over the past few years as groundwork for its foray into telecoms.

In 2010, a 75% stake in Belltel was acquired by SMC through its subsidiary Vega Telecom. Subsequently, a majority stake in financially troubled mobile services provider Express Telecommunications (Extelcom) has also been acquired by the conglomerate. In January 2011, Vega Telecom acquired 40% of Eastern Telecommunications Philippines Inc (ETPI) for $35m. ETPI provides corporate data and internet services and has been in the process of expanding its fibre-optic network to various economic zones and industrial parks in the country. SMC has also partnered with foreign firms to strengthen its position in the sector, forming a joint venture with Qatar Telecom in 1994 called Liberty Telecoms, and launching a wireless broadband service through the Wi-Tribe brand. In 2012, the telecom regulator, the National Telecommunications Commission (NTC), extended Belltel’s mobile licence by three years and the company has stated its intention to expand its network coverage and roll-out services from 2013.

The media conglomerate ABS-CBN Corporation has also been planning to enter the sector and signed a network sharing agreement with Globe Telecom. The firm has announced plans to launch a mobile SIM that will extend a number of services to subscribers apart from traditional media content. The SIM will provide voice, SMS and a various other online services.