Broadband slowest in 20 Asian countries
IF left unaddressed, poor internet connection speeds and quality in the country will limit the success of e-commerce in the Philippines, market research firm BMI Research said in a report.
“We expect the success of e-commerce in Philippines will be limited by poor internet connection speeds and quality, which are below the regional average. A recent comparison study done by TechinAsia found that fixed broadband speeds in Philippines were the slowest amongst 20 Asian countries,” the research firm said.
It added: “At 3.6Mbps, this is well below the regional average of 2 8.1Mbps, and could restrict accessibility to e-commerce websites.”
However, the report said Philippine Long Distance Telephone Co.’s (PLDT) recent investments to strengthen its broadband network highlight the telco’s commitment to improve the quality of its data services, which will complement its digital business.
In 2014, PLDT allocated P34.8 billion toward expanding its fiber network, and plans to spend P39 billion more in 2015 for a total of 114,000 km of fiber. The operator also plans to invest between $50 million and $100 in a second Asia-America Gateway (AAG) submarine cable system to improve connectivity in the Philippines.
“Taking into account that in 2014, mobile broadband penetrations stood at 18.3 percent, while fixed broadband penetration was just 6.2 percent, we believe that the bright spot for online start-ups will be in m-commerce [mobile-commerce]. PLDT observed a growth in smartphone ownership to 30 percent in 2014 with usage increasing by 167 percent from 2013,” BMI said.
The large proportion of prepaid subscriptions in the Filipino market indicates that the population is highly price-sensitive, therefore using a mobile platform for online transactions will be the preferred choice, it said.
“A 2014 survey done by MasterCard shows that 34 percent of Filipinos have made a purchase using their smartphone, a share we believe will increase,” it said.
Strong potential for mcommerce
“Furthermore, PLDT’s strategic acquisition of Paywhere to strengthen its digital business will be supported by the operator’s investment into improving the quality and connectivity of its data networks. Although dismal broadband speeds will limit the viability of online shopping platforms, we believe there is strong potential for mcommerce growth in the Philippines,” the research firm said.
PLDT earlier agreed to acquire Singaporean ecommerce platform start-up Paywhere, through its unit Voyager Innovations, for $5 million.
In January this year, PLDT announced the launch of Philippines Internet Group–a joint venture with Rocket Internet (in which PLDT acquired a 33.3-percent stake in 2014) aimed at developing online start-ups. The acquisition will tie in with the operators ‘ aim to integrate its Smart e-Money mobile money expertise into e-commerce businesses, and will complement PLDT’s strategy to grow its data and digital service revenue streams.
PLDT highlighted in its 2014 annual report that mobile internet revenues grew by 63 percent to P8.1 billion in 2014. Meanwhile, data and broadband revenues grew 20 percent year-on-year to P31.9 billion, accounting for 19 percent of total service revenues compared with 16 percent in 2013.
“We believe that the Philippines’ large population, together with rising data consumption and household incomes, will provide a favorable environment for data-heavy services such as e-commerce to take off in the next five years,” BMI said.
BMI forecasts 3G/4G subscriptions to increase by 33.6 percent over a five-year forecast period, from 18.3 million in 2014 to 24.4 million in 2015.
“In 2014, 82 percent of internet users in the Philippines were also online shoppers and we expect ecommerce to grow rapidly in Southeast Asia. Popular fashion e-marketplaces Lazada and Zalora (both Rocket Internet-backed; Rocket has a 26 .7-percent stake in Lazada) launched in the Philippines in recent years and have recorded strong user growth,” BMI noted.