MANILA – Despite expectations of an ensuing price war once third telco Mislatel Consortium is up and running next year, Globe Telecom is not about to take the bait and rival PLDT Inc. thinks it is too early to talk about such things.
Mislatel has won the bid for the third telco slot in an industry that has long been dominated by Globe and PLDT, but it is coming in equipped with “few existing assets,” Fitch Solutions Macro Research reported.
It will have “a limited short-term impact” as a newbie “and must compete on price,” Fitch Solutions noted.
At best, Filipino consumers “will likely be very interested in at least trying out” Mislatel’s offerings. They will be “motivated by the expectation that a new operator will provide superior services at lower prices,” it said.
Is a price war really inevitable among Globe, PLDT and its mobile subsidiary Smart Telecommunications Inc., and Mislatel when the third telco starts selling its voice and data services in the second half of 2019?
It has a lot to do with what the newcomer intends to do in the market, according to Globe.
“This all depends on the entry strategy of the New Market Player,” said Yolanda Crisanto, senior vice president for corporate communications at Globe, told GMA News Online.
“However, as a matter of course, Globe is not inclined to engage in price wars. Globe competes on superior customer experience, product innovation, and understanding our customers better,” she said.
ALTERED DYNAMICS
PLDT-Smart is of the opinion that there is no certainty at this point regarding what Mislatel will actually do.
“We are deferring comment on this matter,” Ramon Isberto, PLDT-Smart head of Public Affairs, separately told GMA News Online.
Fitch Solutions noted that Mislatel alters the dynamics of market competition in the telecom sector.
“While service quality will be the key focus given that the consortium has to meet coverage and service requirements it presented in its bid papers, it will have to offer very competitive pricing to grasp market share,” it said.
The consortium led by Davao-based businessman Dennis Uy committed to reach 84 percent nationwide mobile coverage by 2023, and spend P256 billion in capital and operating expenses in five years.
Mislatel consists of China Telecommunications Corp. Ltd., with 40-percent equity in the consortium. Uy’s Udenna Corp. has 35 percent, and its subsidiary Chelsea Logistics Corp. having 25 percent.
Consortium partner Mindanao Islamic Telephone Co. Inc. holds a congressional franchise to operate as a telco and owns a telecom infrastructure in Mindanao.
TELCO INFRASTRUCTURE
China Telecom has signed a letter of intent with the Department of Information and Communications Technology to conduct a feasibility study on connecting a subsea cable to the Philippines.
Fitch Solutions believes this is the Hong Kong-Americas Cable. “This is set to increase international bandwidth and lower access costs for the telco as well as the other incumbent operators, supporting data growth across the country.”
Globe noted that it and PLDT-Smart have several subsea cables built through time.
“Subsea cable is just one of the different kinds of infrastructure to support telco operations,” Crisanto said, noting that telecom “is one of [the] heaviest industries in terms of capital spending.”
Globe and PLDT-Smart have the highest capex-to-revenue ratio in Asia, next only to China, she said.
“This only means that the level of investments – coming from the telco players – are substantially higher than most countries which belong to developing economies,” Crisanto added.
UPHILL TASK
It will be an uphill task for Mislatel as it does not have existing fiber assets “in a market that has maneuvered for years to keep new entrants out and has continuously undermined the supervisory power of the telecoms regulator,” Fitch Solutions said.
“To succeed, the new entrant will need to have continued regulatory support from the government to operate,” it said.
However, China Telecom’s influence must not be undermined “as the only player with the technical expertise to make any credible attempt at threatening the existing duopoly,” Fitch Solutions noted.
“We expect the state-owned telco to utilize, to a large extent, compatriot suppliers and manpower to set up its network,” it added, saying that Chinese state-owned entities have an excellent track record in this respect.
What Globe is seeking from the government is fair market competition.
“Our expectation is for government to maintain a level playing field and allow the players to compete fairly,” Crisanto said.
“As our lawmakers are now more inclined to do broad reforms in the telco sector, this will benefit all players—old and new. Hopefully, the reforms will finally address the consumers’ need for first world internet connectivity and help bring about the country’s digital transformation,” she added. (GMA News)
