YEARENDER: Telecoms still a sunrise industry despite challenges

MANILA, Philippines – The year 2009 did not come easy for the telecommunications industry, which had to grapple with sweeping reforms instituted by the government that would change the landscape for better or for worse.

The reforms were triggered largely by investigations conducted by the Senate in the light of revelations by Senate President Juan Ponce Enrile over his so-called vanishing mobile phone loads.

According to Enrile, he could not understand why his cellphone load was diminishing inspite of the fact that he was not making any calls or sending any text messages.

The National Telecommunications Commission (NTC), in response to a clamor from the Senate to look into the high cost of communications in the country, issued a number of circulars aimed at reducing voice call and text messaging rates, and to address the issue of vanishing loads.

The first, issued on June 30, prescribed more stringent service performance standards for cellular mobile telephone service (CMTS). Grade of service attempts should not exceed four percent or four lost calls for every 100 calls, while the drop call rate should not be more than two percent or two dropped calls for every 100 calls.

The second issuance came on July 3, 2009, when the NTC increased the validity and expiration period of prepaid loads.

Meanwhile, the third circular prohibited push messages, in particular text messages in the form of commercial and promotional advertisements, which the NTC said was one of the major reasons for vanishing loads. According to the NTC circular, content and any form of information for a fee shall only be delivered to subscribers who requested for such.

The fourth issuance, NTC Memorandum Circular 05-07-2009 dated July 23, 2009, called for a reduction in the unit of billing for mobile voice services from one minute per pulse to six seconds per pulse for both postpaid and prepaid.

On Dec. 6, 2009, the new six second per pulse billing system took effect for on-net calls or calls within the same network.

However, the country’s four CMTS providers, namely Smart Communications, Globe Telecom, Connectivity Unlimited Resources Enterprise (CURE), and Digital Telecommunications Phils (Sun Cellular), were caught by surprise when the NTC issued cease and desist orders (CDOs) that prevented the telco operators from implementing their respective ways of complying with the new six-second pulse billing regime.

According to the NTC, the said telcos refused and have chosen to defy NTC Memorandum Circular 05-07-2009 that mandated them to implement and impose charges on the basis of a six-second pulse billing regime for voice calls beginning last Dec. 6.

The commission also ordered the telcos to immediately refund their subscribers for the difference in the new six-second pulse billing regime and the previous billing system by way of a rebate or credit.

Still a sunrise industry

Inspite of the challenges facing the telecommunications industry, it continues to be one of the main growth drivers of the Philippine economy, generating a total of P218 billion in revenues and contributing three percent to the country’s GDP last year.

The industry continues to be dominated by the mobile business which comprised over two-thirds of total telco revenues.

Mobile telephony has reached over 80 percent SIM penetration level, however, taking out incidences of multi-SIM usage, penetration on a unique subscriber basis is around 79 percent as of end September 2009. It is expected that the mobile market will continue to see growth, albeit at a slower rate compared to the high double digit growth rates back in the earlier years.

Broadband is currently the bright spot in the Philippine telco industry. Though still at its infancy, Globe Telecom said it gas started to see upward trajectory growth both in revenues and subscriber take up since its inception.

Household penetration of broadband currently remains low at around 11.3 percent as of end September  but it continues to be a major growth area, as shown by trajectory growth the past couple of years. As of end Sept., total broadband revenues (industry) grew 35 percent contributing seven percent to total industry revenues (based on a two-player market).

As of the same period, Globe had a wireless subscriber base of 23.1 million and broadband subscribers of around 520,000, already ahead of its full-year guidance of half a million by end of 2009.

Among the challenges faced by Globe in 2009 include increasing competition (rising incidence of multi-SIM usage, consumer shift to bulk and unlimited offerings) and regulatory pressures (new regulations such as extension of prepaid validity and per pulse billing), persistent issue on tax on text messages, high churn as the gap between gross and net adds continues to widen and declining average revenue per user (ARPU).

A number of developments, however, indicate better days ahead for the industry, according to Globe. These include increasing awareness and affordability of both the Internet service and access devices as prices of PCs, notebooks or netbooks continue to become more affordable;  increasing need to be always connected and the continued growth of social networking sites such as Friendster, Facebook, Twitter; and growing subscriber preference for unlimited and bucket voice and SMS offers due to its wide availability and affordability.

To capitalize on these developments, Globe said that it will strengthen its mobile brand portfolio and ensure that the unique value propositions of its various brands are well understood by their respective market segments, both at the functional and emotional level.

The company will also continue to upgrade, modernize, and improve the robustness of its mobile networks to achieve superior network quality and coverage, resume the growth of its subscriber base with increased emphasis on quality acquisitions, expand the coverage of its loyalty programs to improve retention, and launch new and innovative offers to drive adoption, stimulate usage, and increase its share of wallet in a market seeing steady growth in multi-SIM ownership.

As for its broadband business, Globe said it is accelerating its network build to quickly capture emerging opportunities in this market.  “Our aim is to build a pervasive presence, acquire and own subscribers, and build an ecosystem through which we can generate additional value. Our WiMax build is on track and now covers additional towns and cities, while our 3G with HSPA network is being upgraded to better serve our existing customers and support the exponential growth in demand. We will continue to expand our WiMAX coverage to reach more areas and deepen penetration by upgrading selected sites given strong take-up,” it added.

Globe officials said they will respond to competitive market moves to protect and grow their share of the broadband market. “Broadband’s growth has been driven by increasing awareness and affordability of both the Internet service and access devices, whether PCs, notebooks or netbooks. The introduction of prepaid services has also helped drive adoption, especially in the lower segments of the market. Last September, the cash outlay for the modem or Internet stick was cut by key players to under P1,000 from around P1,900 previously. In response, Globe Tattoo Prepaid kit is now priced at P895 (from P1,895) with P300 free load good for 15 Internet hours. We expect the market’s growth to accelerate even further with this price cut,” they pointed out. –Mary Ann LL. Reyes (The Philippine Star)