Telcos seen to continue higher revenue haul in 2022

**media**

The future remains stable for local telcos as the continuing pandemic boosts data consumption and broadband use, ensuring they haul in higher revenues.

And this despite the decline in legacy voice and messaging services, both of which now account for smaller portions of the revenue pie.

Overall, analysts expect local telco revenues to grow as consolidation eases competition in emerging markets.

In the next two years, they see competition and scale benefits driving consolidation in some emerging markets, while free cash flow will turn positive despite high capital spending as companies rein in shareholder returns.

So far, the country's newest telco, DITO Telecommunity Corp. hit 5 million subscribers on December 18, 2021, just nine months after its commercial launch, earning more than P2 Billion Pesos in revenues from prepaid services, according to Chief Administrative Officer Atty. Adel Tamano.

In addition, DITO reached more than 500 areas nationwide, making its service available in more than 40,000 points of sale.

It has laid out more than 22,000 kilometers of fiber cable and built more than 4,100 towers --- more towers than needed to service its subscribers nationwide.

"Some said that rolling out DITO in the time given was impossible. Our milestones speak for themselves," he added.

Nevertheless DITO's holding firm, DITO CME Holdings Corp (DITO CME) bled P2.808 billion after consolidating the telco's financials into its third quarter report as operating expenses ballooned in the wake of the telco's nationwide rollout to comply with its licensing commitments.

“DITO Tel is playing the long game," maintained DITO CME President Eric Alberto. "From day one, we did mention that building a telco from scratch will be capital extensive but the milestones reached in just nine months of operation is encouraging to say the least.”

In the meantime, well-entrenched competitors, Globe Telecom Inc. as well as PLDT Inc. and wireless subsidiary Smart Communications Inc. seek to transform themselves after the pandemic accelerated the pace of the country's digitalization.

Already, Globe is pivoting away from its core business to become a digital solutions platform over the next five to 10 years, disclosed President and CEO Ernest L. Cu.

To keep in pace with the speed of consumer digital adoption, the company is going beyond telco, exploring adjacent business space, from healthtech, fintech, adtech and e-commerce.

"We use telco as the platform to create new businesses,” he explained. "Globe, five years or maybe even ten years from now, will be a digital platform."

"This is very similar to what Google has done, where they used their search (engine) as a basis to create new businesses, what companies like Grab has done, where they used their ride-hailing app to create new businesses," Cu elaborated.

One of Globe’s businesses created to leverage the firm’s assets and expertise is e-wallet GCash, tripling its gross transactions handled to P3 trillion in 2021 from P1 trillion in 2020.

It is a first mover and the only mobile wallet with a full suite of accessible financial services.

“Our objective is to create this flywheel that keeps spinning faster and faster, creating new businesses," Cu noted.

"If you can create a large GCash business, which is the only Philippine dollar unicorn out of the telco business, imagine the third business that we create with the help of both Globe and GCash. Globe has over 81 million mobile subscribers, and GCash has 48 million.”

Aside from GCash, other portfolio companies under Globe’s corporate builder 917Ventures include telehealth service platforms KonsultaMD and HealthNow, a digital and mobile marketing solutions firm.

It also has adtech company AdSpark, loyalty, and e-commerce solutions provider RUSH, and online grocery shopping platform PureGo.

Innovations under 917Ventures are online learning platform Edventure, marketplace fanlife, online study-now-pay-later bootcamp KodeGo, A2P messaging platform M360, online seller platform BentaTV, and self-service dashboard iNQUiRO.

Globe also continues to scale up its information technology solutions and services through multi-payment platform Electronic Commerce Payments Inc. (ECPay) to onboard 70,000 general trade retailers in 2021.

Globe’s corporate venture capital arm, Kickstart Ventures, now has $240 million aggregate assets under management from $2.4 million in 2012, focusing on media, content and advertising, healthtech, and logistics tech.

To support the connectivity needs of businesses and the public, Globe has earmarked P76 billion for its capital expenditures for 2021.

This allowed the company to put up 641 new cell towers, upgrade 8,175 mobile sites, build 1,906 5G sites nationwide as of end-September, and lay down over one million high-speed broadband lines.

Notably, despite economic and public mobility challenges due to the pandemic, Globe continues to be profitable due to rising data consumption and broadband usage.

Globe netted ₱18 billion earnings, up 13 percent, on ₱113.6 billion revenues, up 4 percent in the first nine months of 2021 versus the same period last year.

“We are happy to report a resurgent business performance in the third quarter, with the topline now back to pre-pandemic levels," remarked Cu.

Globe's total data revenues accounted for 80 percent of total service revenues from 76 percent in 2020.

Mobile business remained stable growing by 1 percent year-on-year, mostly fueled by higher prepaid top-ups given the consumer’s heightened need to maintain connectivity.

The telco's revenues improved despite the fact that Metro Manila was under hard lockdown again last August to curb the spread of the Delta variant.

As for PLDT and Smart, “We are cautiously optimistic that as the economy reopens, we are best positioned to serve our customers through the new normal, as evidenced by our strong results for the first nine months of 2021," says Alfredo S Panlilio, President and CEO of both companies.

"The digital transformation of our country is at the top of the PLDT Group’s agenda,” according to Manuel V Pangilinan, Chairman of PLDT, Voyager Innovations and PayMaya.

To support its expanded digital ecosystem, PLDT and Smart spent ₱63.3 billion in capex for the first nine months and are on track to meet their 2021 full-year capex guidance of at least ₱88 billion.

Network upgrades continue to represent the bulk of capital expenditures.

In the first nine months of 2021, PLDT's Consolidated Service Revenues rose 7 percent, to ₱135.9 billion, driven by record-high service revenues of ₱46 billion in the third quarter.

However, reported net income declined by 4 per cent to ₱18.8 billion due to revaluation losses after the peso depreciated this year.

Still, PLDT remains on track to reach its full year core income guidance of ₱30 billion.

As limited mobility confined customers to their homes, revenues from Smart’s fixed wireless solutions grew 88 percent to ₱2.5 billion.

To top it all, the PLDT Group, through ePLDT, will build the first hyperscaler data center in the Philippines, designed to serve the power and IT requirements of global tech giants.

The new hyperscaler data center, to ground break this 2022, will be completed by the first quarter of 2024.

It will have more power capacity than PLDT’s network of 10 globally certified VITRO data centers combined.

It will also be telco neutral and incorporate sustainability in its design and operations.

Supporting this bid to become a hyperscaler hub is PLDT’s current international cable network of 15 global subsea cable systems with total capacity of 19 Tbps.

The completion of the Jupiter Cable system slated in Q2 2022 would further increase PLDT’s international capacity to 60 Tbps.

Ultimately, sustainability and digitalization now define the company's market value, traditional metrics alone no longer apply, PLDT Chairman Pangilinan pointed out.

"These two are no longer options but imperatives,” he concluded.

#GLOBR TELECOM INC

Telcos seen to continue higher revenue haul in 2022