Internet-savvy Filipinos need faster-paced telcos

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Globe President and CEO, Ernest Cu (left) and PLDT Chairman Manuel Pangilinan

Globe President and CEO, Ernest Cu (left) and PLDT Chairman Manuel Pangilinan

IT has been more than two decades since the internet invaded Philippine cyberspace, and today Filipinos are among the world’s pace setters in demand growth with which telecom providers are finding hard to catch up.

Who could have expected that online social media service Twitter would generate more than 25 million tweets in a single day from avid Filipino fans of a romance teleseries (Al-Dub) that forms a segment of a noontime TV variety show?

But in fact, it did last month, on Sept. 26, in a culmination of a “love affair” between a young unknown girl pulled out from among the street viewers and a guest actor celebrity.

As of January this year, almost 42 percent of the world’s population had access to the internet, according to net-based global marketing agency We Are Social. The figure reflects growth from 35 percent recorded the previous year.


The agency says internet users around the globe spend an average of 4 hours and 25 minutes using the net each day, with Southeast Asians, led by Filipinos, registering the highest average daily use.

The agency quoted a report by GlobalWebIndex that Filipino internet users spend more than six hours a day on the net, while the Thais, Vietnamese, Indonesians, and Malaysians all average more than five hours of net use per day.

No wonder local telecommunication companies are in a race to get the internet-savvy Filipinos into their networks.

Globe goes for big bucks
Globe Telecommunications, Inc., owned by business icon Ayala group, is aiming to keep its industry lead, as well as its P100-billion revenue target this year.

“Yes, absolutely,” says Globe President and CEO Ernest Cu, when asked about the target. “If you look at the first half, I think we’re at 56 (billion pesos).”

On August 4, Globe reported an all-time-high net income of P8.7 billion for the first half of the year, up 27 percent from P6.8 billion a year earlier, despite higher depreciation expenses and non-operating charges.

Postpaid revenues were up only 8 percent year-on-year due to a higher customer base. As of end-June, Globe’s mobile subscriber base reached 48.4 million, growing 13 percent from 42.7 million a year earlier.

The firm’s core net income reached an all-time high of P8.6 billion, up 14 percent from P7.6 billion in the comparable period. This item did not include the impact of non-recurring items, as well as foreign exchange and mark-to-market charges.

The telco closed the first half of 2015 with record-level consolidated service revenues of P53.8 billion, up 13 percent from P47.7 billion, supported by revenue gains from mobile data and broadband service.

Globe’s prepaid business grew 8 percent during the period, while the telco’s mass-market brand TM expanded 15 percent.

Globe used up P11.4 billion in capital expenditure in the first semester of the year to support a growing subscriber base and the demand for data.

PLDT-Smart’s wise spending
Globe’s main rival, Smart Communications, owned by telco giant Philippine Long Distance Telephone Company (PLDT), has been spending huge amounts to keep its dominance in the industry.

PLDT Chairman Manuel Pangilinan says the company has increased its 2015 capital expenditure to P43 billion, but this could also indicate preparation for a tough year for the company profit-wise.

PLDT announced its unaudited financial and operating results for the first six months of 2015, with consolidated core net income, before exceptional items, amounting to P18.9 billion, down 5 percent or P0.9 billion from the P19.8 billion recorded in the same period last year.

Net income, after reflecting exceptional transactions for the period, declined 6 percent to P18.7 billion from P20 billion in the first half of 2014, as a result of the dip in core net income and net foreign exchange and derivative losses.

“We’ve fallen from the saddle, and it is our full intention to climb back to that saddle and ride on it,” Pangilinan says in the company’s first half-year report. “It would take a while, (and) we anticipate that perceptible changes will only be seen in the course of 2016, so it could be a tough year for 2015 from the profit standpoint.”

The Filipino tycoon says PLDT’s capex levels will remain high at least through 2015 and 2016, in the hope of reaping the benefits later.

“We are investing heavily in the ‘digital spine’ for our networks and platforms that will serve as the foundation for this transformative process, and we expect to see the benefits of these initiatives to fully manifest themselves by 2016 at the earliest,” says Pangilinan.

“Our goal is to be nothing less than the consumer’s preferred digital services provider,” he explains, “And we will achieve this by offering the consumer a superior value proposition, by continuously broadening the array of our products and service offers, including leveraging on fixed and wireless assets, underpinned by a network that will enable a quality customer experience.”

The PLDT Group’s combined broadband subscriber base reached 4.9 million at the end of June 2015. Of this, 3.7 million use wireless broadband mainly from Smart, while 1.2 million use PLDT’s fixed broadband service.

PLDT’s fixed-line subscriber base has grown to about 2.3 million as of the end of the first half of this year. About half of the subscribers have fixed broadband subscriptions.

Postpaid revenues account for 23 percent of total cellular revenues, improving by 12 percent to P11.6 billion in the first six months of 2015.

The PLDT Group’s total cellular subscriber base at the end of the period stood at 68.9 million. Of this number, Smart had 25.3 million subscribers under its mainstream Smart brands; value brand Talk ‘N Text had 27.9 million subscribers; and Sun Cellular, 15.6 million subscribers.

The group’s combined postpaid cellular subscriber base grew by over 461,000 from the first half of 2014 to just over 3 million at the end of June 2015. The group’s combined prepaid base stood at 65.8 million at the end of this year’s first semester.

Consolidated corporate data and other network services were higher by 14 percent at P5.3 billion.

Too slow
But the local telcos still have a lot of catching up to do, primarily in terms of internet speed.

“I think the need now really is dependability,” says Luis Limlingan, analyst and managing director of stock brokerage firm Regina Capital Development Corp. “You know, people are complaining, and there is a study that our internet speed is slow. Obviously, that’s the one that is under-served.”

The country’s leading telcos—Globe, PLDT, and Smart—are listed on the Philippine Stock Exchange.

Last year, amid mounting complaints about slow internet service in the Philippines, the major telcos PLDT and Globe Telecom said they were investing heavily in network expansion and technology upgrades to provide better and faster service.

This was after a lawmaker urged telecommunications companies to look at ways to improve the country’s poor internet connectivity, which is crucial to economic growth.

Sen. Bam Aquino, chairman of the Senate committee on trade, commerce, and entrepreneurship, wanted to find out if consumers were getting their money’s worth from the telcos, citing reports that the Philippines had the lowest average internet speed in Southeast Asia.

Data from the Association of Southeast Asian Nations (Asean) shows the Philippines’ internet speed (3.6Mbps) lags behind Laos (4.0Mbps), Indonesia (4.1Mbps), Myanmar and Brunei (4.9 Mbps), Malaysia (5.5Mbps), and Cambodia (5.7Mbps).

Vietnam hosts speeds of up to 13.1Mbps and up to 17.7Mbps for Thailand. These are the only two other Southeast Asian nations joining Singapore (61Mbps) with internet speeds above the Asean average of 12.4Mbps.

“Left unresolved, poor internet connection speeds and quality limit the success of e-commerce in the Philippines,” says BMI Research, a unit of the Fitch Group, in a report.

“We expect the success of e-commerce in the Philippines will be limited by poor internet connection speeds and quality, which are below the regional average,” the research firm says. “A recent comparison study done by TechinAsia found that fixed broadband speeds in the Philippines were the slowest among 20 Asian countries.”

Again, it is no wonder that according to We Are Social research, South and Southeast Asia lag behind the rest of the world when it comes to e-commerce. The global branding expert says that in the past month alone, fewer than one in five Thais and Filipinos used e-commerce. At the same time, barely 14 percent of Indians bought something online. India, the firm says, has a slow internet speed of 2Mbps. The global average is 4.5Mbps.

Mobile Internet
Mobile’s share of global web traffic leapt 39% since the same time last year, with one-third of all web pages now served to mobile phones:

The good news is that the potential for faster mobile internet access has grown exponentially in the past year, with 39% of all global mobile connections now classified as ‘broadband’ (i.e. 3G or 4G):

Based on the trends within this data, we expect that mobile will help to push internet penetration beyond 50% of the world’s population during mid to late 2016.

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