Telecoms consolidation in Phl inevitable – research firm

MANILA, Philippines – Consolidation in the Philippine telecommunications industry is inevitable, with more companies likely to be absorbed, especially since the local market size can only support no more than three major carriers, Canada-based ICT research firm XMG Global said.

“In the current economic climate, leaders must have substantial market share and respectable financials,” it noted in a report.

However, XMG pointed out that government regulators must focus in preparing the industry for a new equilibrium and safeguarding the welfare of the consumers.

It explained that this can be achieved by consistent regulatory action, simplifying market entry, ensuring healthy competition, strengthening anti-trust laws, and encouraging the flow of investments and innovation.

XMG Global benchmark shows that mobile operators, on average, require a market share of at least 30 percent to be profitable.

It cited the proposed deal between PLDT and Digital Telecommunications Phils. Inc. (Digitel) will push the combined market share of Digitel’s Sun and PLDT’s Smart to 69 percent, an increase in network size and coverage, and the ability to synergize, leverage costs and drive economies of scale.

“Add PLDT’s media affiliations and you also have content,” XMG Global said, referring to PLDT’s investments in the national broadsheets as well as radio and television networks.

On the other hand, rival Globe Telecom holds a 31 percent market share and, with the entry of Liberty Telecoms, XMG Global said “we expect the market to expand to a new, but uneasy equilibrium that would benefit consumers.”

However, XMG Global said it does not expect further significant decline in pricing or drastic changes in the telecommunication landscape until the issue of interconnectivity charges are redressed or preferably removed altogether.

“Although PLDT is adamant that it will not end Sun’s unlimited pricing plans, it is too early to tell on how this will impact the discount cellular product offerings,” XMG Global said.

It noted that PLDT, Globe and other emerging players will be forced to review and rethink their strategies and this can eventually result in changes in services bundling and pricing. –Mary Ann Ll. Reyes (The Philippine Star)