A Philippine government push for improved telecoms services ran into major short-term headwinds as two mobile newcomers face a variety of financial and deployment obstacles, many related to Covid-19 (coronavirus) restrictions, and incumbents Globe Telecom and PLDT sharply cut capex for 2020.
Dito Telecommunity, which in November 2018 was named the country’s third major operator [1], earlier in the year pushed a planned commercial launch [2] from mid-2020 to March 2021.
By mid-September, the newcomer said it had deployed two-thirds of the 1,300 towers required to achieve the mandated target of 37 per cent population coverage and download data rates of 27Mb/s within a year of receiving its licence in July 2019. In addition to delays caused by the pandemic, it also faced numerous disputes over site acquisition for towers.
The operator was formed by a consortium comprised of China Telecom, Chelsea Holdings and Udenna Corp. It committed to invest PHP257 billion ($5.3 billion) over five years, with PHP150 billion earmarked for the first year.
Its licence requires it to reach 84 per cent coverage and data rates of 55Mb/s within five years.
Fourth player
New mobile entrant Now Telecom in mid-September secured an extension of its permit from the National Telecommunications Commission (NTC) to operate as the country’s fourth major operator. It holds a 25-year franchise to provide telecoms services and 20MHz of spectrum in the 3.5GHz band, which analysts say isn’t sufficient to operate nationwide service: Globe Telecom and PLDT each holds 60MHz in the band, and Dito Telecommunity 40MHz.
As a condition for the extension, Now Telecom must invest PHP6.3 billion in a nationwide network over two years and increase its capital by at least PHP1.9 billion.
The operator, which currently offers fixed and wireless broadband, and cloud services to enterprises, outlined plans in June to invest $713 million over five years to deploy a 5G fixed wireless access network. The company said it expected to raise capital through various fundraising steps and recently teased plans to go public.
In December 2019, it forged tower sharing deals [3]with Aboitiz InfraCapital and Frontier Tower Associates Management, and two months earlier turned to South Korea-based SK Telecom [4] for expertise in rolling out a standalone (SA) 5G network.
Surprisingly, the NTC did not set specific network performance targets for Now Telecom, Globe Telecom or PLDT’s mobile unit Smart Communications.
Janice Chong, director of corporates for APAC at Fitch Ratings, expects competition to intensify in the medium term as the new players vie on price with larger data bundles to drive subscriber growth, but said the impact is likely to be limited over the next 12 months in view of their restricted coverage. Dito Telecommunity is only targeting service across 17 cities and municipalities.
Ultimatum
In July, President Rodrigo Duterte threatened to shut down the two incumbent operators, which have a near duopoly on mobile service, unless they significantly improve the quality of service by December.
Earlier this month he said Dito Telecommunity would lose its PHP26 billion performance bond if its network doesn’t outperform the incumbents.
Globe Telecom and PLDT both significantly raised capex over the past few years.
In 2019, PLDT increased capex 25 per cent to PHP72.9 billion, representing 45 per cent of service revenue. It had raised its 2020 budget by 14 per cent [5] before trimming it back [6] due to Covid-19 restrictions.
Globe Telecom increased capex 18 per cent in 2019 to PHP51 billion, or 34 per cent of service revenue, but it lowered its 2020 spending [7] from PHP63 billion to PHP50.3 billion due to delays caused by quarantine.
The investments helped improve coverage and data rates. Between Q1 2018 and Q1 2020, the average mobile download speed in the country increased 52 per cent to 8.5Mb/s, Opensignal data showed. An important factor in the improvement was a jump in 4G availability from 65.9 per cent to 83.3 per cent.
Despite the speed gains, the country’s global mobile internet ranking remains low, positioned 83rd out of 100 countries in an Opensignal study conducted in Q1. It needs to nearly double download speeds to approach the global average of 15.4Mb/s. The Philippines increased speeds by 2.9Mb/s over the two-year period, compared with an average 3Mb/s year-on-year gain in Q1.
Reduced red tape
While its global ranking hasn’t changed much, the government’s efforts to streamline complex processes [8] around building shared infrastructure is making steady progress, with more than a dozen additional tower companies expressing interest [9] in establishing operations.
The Department of Information and Communications Technology already issued approvals to 24 tower companies. In July, it joined with eight other agencies to simplify procedures, targeting a reduction in the timeline for building new sites from more than 200 days to 16 days.
Chong told Mobile World Live simplifying tower sharing will allow operators to accelerate the pace of network rollout over the next few months, but noted the policy only applies to new towers rather than existing sites: “It will be challenging for newcomers to match the network quality of the incumbents.”
Despite Globe Telecom and Smart Communications announcing 5G coverage in parts of the greater Manila area, she said they are likely to depend on 4G networks to meet strong demand for data in the next few years. “The momentum of 5G rollouts will depend on the affordability and availability” of compatible devices.
“Customer premise equipment would need to decline substantially to cater for the domestic prepaid market, which yields a monthly ARPU of $2 for mobile services.”
With Globe Telecom and PLDT’s infrastructure spending curbed for 2020, and the newcomers offering limited coverage for at least another year, the prospect of the country gaining in the global speed rankings is slim. Filipino consumers will need continued patience, which is something the country’s president is unlikely to practice. Expect more pressure on all operators if speeds don’t start to climb by the year-end.
The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.
[1] https://www.mobileworldlive.com/featured-content/top-three/china-telecom-backed-venture-wins-philippines-race
[2] https://www.mobileworldlive.com/asia/asia-news/philippines-newcomer-dito-delays-launch
[3] https://www.mobileworldlive.com/asia/asia-news/now-telecom-lines-up-tower-sharing-partners
[4] https://www.mobileworldlive.com/asia/asia-news/now-telecom-taps-skt-5g-skills
[5] https://www.mobileworldlive.com/asia/asia-news/pldt-network-investment-reaps-continued-dividends
[6] https://www.mobileworldlive.com/asia/asia-news/pldt-makes-further-capex-budget-changes
[7] https://www.mobileworldlive.com/asia/asia-news/globe-telecom-forecasts-lower-revenue-for-2020
[8] https://www.mobileworldlive.com/asia/asia-news/philippines-move-to-cut-red-tape-attracts-tower-interest
[9] https://www.mobileworldlive.com/asia/asia-news/philippines-makes-tower-sharing-progress
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