CEO lashes back at duopoly critics

High infra cost biggest barrier to telco entry – Globe


THE high cost of putting up network infrastructure and difficult deployment remain the biggest barriers for entry into the telecommunications industry, Globe Telecom Inc. said on Wednesday, rebuking critics who have been calling for a new industry player to improve services.

“I have said it time and again, Globe is ready and willing to compete with any player old or new,” Globe president and chief executive officer Ernest Cu said in a multi-stakeholder forum in Davao City.

But Cu added that any new player who wants to come in should build incremental infrastructure in order to improve telco services in the country.

“The new player should not sit idly by waiting for existing operators to just open up and use whatever infrastructure is available because doing so will not help solve existing industry challenges,” he said.

The country’s telecommunications industry is dominated by the so-called duopoly of Globe and its rival PLDT Inc.

He also reminded critics that the current industry barriers were not put up by existing telco players but a combination of high network spending running to multi-billion dollar investments due to a lack of infrastructure and difficulties in network deployment because of bureaucratic red tape that further increases the cost of operations.

“This industry is very difficult to penetrate because the barriers to entry are very expensive to overcome and because deployment of networks is very challenging due to local government issues,” said Cu.

He cited the case of San Miguel Corp. (SMC), which early this year was on the verge of launching a telco business. However, following the sellout of San Miguel’s telco assets in late May, it was found that its existing telco infrastructure was barely adequate.

“How can this supposed player compete when they cannot deploy a network? When we found San Miguel, who was threatening to launch a network, they only had 230 cell sites. That is after TWO years of trying to build a network. You’ve heard about them trying to build their network but in reality, you go there, there’s nothing in there,” he said.

The official confirmed that following the joint buyout, these sites had to be dismantled, adding that there was no incremental value because the sites built on already have existing telco sites.

The Philippines, like many other telco markets globally, is characterized as mature and very competitive with basic services like SMS and voice being replaced by OTT players. An OTT player is a telecommunications service provider that delivers one or more services across an IP network.

While there are present opportunities in data services, late entrants are hard-pressed to become game changers and be effective at market differentiation by innovation.

“Globally, there are many markets where late comers to a mature, highly competitive market never make it. The late entrants end up being bought by one of the other players,” Cu pointed out.

He further cited the case of Sun Cellular, which ended up being acquired by a dominant player.

“Sun was a third player, but which was eventually acquired by a dominant player. While good disruption tends to bring out the best among players, the acid test is whether they are able to sustain their business,” he said.

Globe has repeatedly called on government to play its role in addressing the challenges faced by the local telco industry. To deploy network infrastructure, it takes 25 permits and about eight months to complete the approval process of one cell site.

The Philippines continues to lag behind in terms of cell site density that will improve mobile internet experience in the country.

In addition, the rollout of fiber optic cables as a last-mile solution to bring broadband services to homes is likewise challenged due to right of way issues.


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