3rd telco to stir up competition but PLDT and Globe unfazed
Published Nov 8, 2018 12:00 am
By Emmie V. Abadilla
Analysts say that the emergence of a provisional third telco in the country will stir up the waters and jack up competition.
(REUTERS/Brendan McDermid/Files / MANILA BULLETIN)
However, the telecom duopoly maintains it will take two to three years for the third player to set up its infrastructure, if it finally clinches the deal at all.
After telecom regulators named Mislatel consortium, China Telecom's partnership with local company, Udenna Corp., as the provisional third telco the other day, Fitch Ratings-Singapore says that will “likely put an end to the country's long-standing duopoly market.”
The Mislatel consortium now qualifies for the next stage of screening after the National Telecommunications Commission Selection Committee disqualified two other consortia during this Wednesday (November 7, 2018) bidding for the third telco slot.
“The third telco is initially likely to compete aggressively on price as it strives to grab market share in an already highly saturated mobile market,” according to Fitch Ratings.
“We expect a large cash burn for the new entrant to roll out its network and consequently, only a newcomer with deep pockets and technical expertise would be able to compete effectively against the incumbents.”
“Fitch expects this to temper revenue growth and raise the capex (capital expenditures) pressure on PLDT, Inc. (BBB/Stable) and Globe Telecom, Inc. (BBB-/Stable). The Philippine government has been pushing for a third telco over the past two years to intensify competition and improve the country's Internet connectivity.”
The question is, if the third telco passes the muster of telco regulators and get its license, how long will it take them to build their network?
To attain the average speed and the 33 percent coverage they have committed to the government, it will take them to two to three years. PLDT executives estimated. “The impact of the third player won’t be significant (to us) in the first year although they can conjure something new or creative,” PLDT and Smart Communications, Inc. Chairman, President and CEO Manuel V. Pangilinan told reporters in yesterday’s press briefing.
“It depends on how fast the third telco will build out their infrastructure,” he explained. Furthermore, “The third player will most likely focus on wireless. Fixed line is where the market strength of PLDT lies. We have a significant fixed line business and expect good growth for our fixed line business, we’re optimistic we’ll forge ahead in very significant way in 2019."
Globe Telecom, for its part, welcomed the new telco challenger which is seen to help foster a healthy competitive environment and ultimately benefit consumers. However, they have not given a feedback to the Fitch Ratings report as of press time.Indeed, even Fitch Ratings admitted that “the severity of the threat from a new entrant is unclear at this stage, though government intervention may be needed to accelerate industry reforms to raise competition.”
This includes re-evaluation of the current 40% foreign-ownership cap for public utilities, infrastructure and tower sharing, as well as spectrum redistribution.
Even after setting aside spectrum frequencies to the new telco, the incumbents still possess a majority of the rights across a range of spectrum frequencies, some of which were acquired from their joint purchase of San Miguel Corp.'s telecom assets in 2016.
The spectrum limitation of the third licence suggests that the newcomer would focus on the cost-effective long-term evolution (LTE) network to accelerate network rollout.
The ability to monetize higher data traffic remains a key challenge in the Philippines, which is also facing secular declines in revenue from legacy services such as SMS, international and mobile voice, according to Fitch Ratings.
“The aggressive LTE rollout by the incumbent operators would also raise entry barriers for the newcomer. Fitch sees fixed-mobile convergence as advantageous, allowing telcos to tap into the fast-growing home-broadband market to mitigate mobile pressure and retain customers.”
Fitch has a negative sector outlook on the Philippine telecoms market due to the intensifying competition, and our expectations that net leverage for the sector will rise to around 3.0x through to 2020 (2017: 2.6x).
(REUTERS/Brendan McDermid/Files / MANILA BULLETIN)
However, the telecom duopoly maintains it will take two to three years for the third player to set up its infrastructure, if it finally clinches the deal at all.
After telecom regulators named Mislatel consortium, China Telecom's partnership with local company, Udenna Corp., as the provisional third telco the other day, Fitch Ratings-Singapore says that will “likely put an end to the country's long-standing duopoly market.”
The Mislatel consortium now qualifies for the next stage of screening after the National Telecommunications Commission Selection Committee disqualified two other consortia during this Wednesday (November 7, 2018) bidding for the third telco slot.
“The third telco is initially likely to compete aggressively on price as it strives to grab market share in an already highly saturated mobile market,” according to Fitch Ratings.
“We expect a large cash burn for the new entrant to roll out its network and consequently, only a newcomer with deep pockets and technical expertise would be able to compete effectively against the incumbents.”
“Fitch expects this to temper revenue growth and raise the capex (capital expenditures) pressure on PLDT, Inc. (BBB/Stable) and Globe Telecom, Inc. (BBB-/Stable). The Philippine government has been pushing for a third telco over the past two years to intensify competition and improve the country's Internet connectivity.”
The question is, if the third telco passes the muster of telco regulators and get its license, how long will it take them to build their network?
To attain the average speed and the 33 percent coverage they have committed to the government, it will take them to two to three years. PLDT executives estimated. “The impact of the third player won’t be significant (to us) in the first year although they can conjure something new or creative,” PLDT and Smart Communications, Inc. Chairman, President and CEO Manuel V. Pangilinan told reporters in yesterday’s press briefing.
“It depends on how fast the third telco will build out their infrastructure,” he explained. Furthermore, “The third player will most likely focus on wireless. Fixed line is where the market strength of PLDT lies. We have a significant fixed line business and expect good growth for our fixed line business, we’re optimistic we’ll forge ahead in very significant way in 2019."
Globe Telecom, for its part, welcomed the new telco challenger which is seen to help foster a healthy competitive environment and ultimately benefit consumers. However, they have not given a feedback to the Fitch Ratings report as of press time.Indeed, even Fitch Ratings admitted that “the severity of the threat from a new entrant is unclear at this stage, though government intervention may be needed to accelerate industry reforms to raise competition.”
This includes re-evaluation of the current 40% foreign-ownership cap for public utilities, infrastructure and tower sharing, as well as spectrum redistribution.
Even after setting aside spectrum frequencies to the new telco, the incumbents still possess a majority of the rights across a range of spectrum frequencies, some of which were acquired from their joint purchase of San Miguel Corp.'s telecom assets in 2016.
The spectrum limitation of the third licence suggests that the newcomer would focus on the cost-effective long-term evolution (LTE) network to accelerate network rollout.
The ability to monetize higher data traffic remains a key challenge in the Philippines, which is also facing secular declines in revenue from legacy services such as SMS, international and mobile voice, according to Fitch Ratings.
“The aggressive LTE rollout by the incumbent operators would also raise entry barriers for the newcomer. Fitch sees fixed-mobile convergence as advantageous, allowing telcos to tap into the fast-growing home-broadband market to mitigate mobile pressure and retain customers.”
Fitch has a negative sector outlook on the Philippine telecoms market due to the intensifying competition, and our expectations that net leverage for the sector will rise to around 3.0x through to 2020 (2017: 2.6x).