Telco industry duopoly enhanced

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EVERYONE was hoping that San Miguel Corp.’s talks with the Australian Telstra group would result in the emergence of a third powerful telecommunications corporation to compete with Globe and PLDT/Smart, the two corporations that for years have been operating the telco duopoly in our country.

A third large telco corporation would, according to conventional economic thinking, make each of the players do its best to excel in giving the best services at the lowest price to become the sector leader.

In the Philippines, however, this basic principle does not always govern reality. The conglomerates that dominate an industry do not compete with each other. They run cartels. This is exemplified by, among many other examples, the two major telco sector players.

The Philippine telco industry is supposed to be a deregulated, Filipino controlled infrastructure sector. It is not so. It is in a very real sense a fraud. It is not deregulated. It is the best example of regulatory capture. Foreign citizens and companies control the market and the government agencies that are tasked to regulate the telecom corporations and the industry.


For years, the Philippines has been at the mercy of two conspiratorial telecom providers, the Philippine Long Distance Telephone Co. (PLDT), which is largely owned by the corporate web controlled by Indonesian tycoon Anthoni Salim, and Globe Telecom, whose biggest shareholder is Singtel, which is in turn controlled by Singapore’s state-owned investment arm Temasek Holdings.

Both companies offer services under various brand names to provide consumers the illusion of choice, but the sad fact of the matter is that consumers have none. There is no competitive difference whatsoever between the two telecom giants’ services. Both are grossly inadequate and overpriced, and the reason for that is that they continue to benefit from generous regulation and business risk mitigation, which successive governments since the Ramos administration have unquestioningly assumed were necessary to keep their largely foreign investments in the Philippines.

To Singtel and the Salim group, the Philippines’ only importance is as a revenue source; so long as government regulations allow them to collect healthy revenues while putting forth the least effort, they will do so. That is an infuriating reality, but one which the companies, which after all are for-profit enterprises, really cannot be blamed for. It is rather our government on whom the blame should fall, for letting this state of affairs persist.

So, with the collapse of the possibility that San Miguel’s small-size venture into the telco industry would grow into a gigantic joint venture partnership with the Aussie Telstra Group, any hope that real competition would at last rise against the duopoly of Indonesia’s PLDT and Singapore’s Globe also petered out.

The two conglomerates could not help themselves from giving immediate proof of their duopolistic collaboration.

They signed last Monday a massive agreement to buy the defunct telecom business that San Miguel was going to launch into a rival of PLDT/Smart and Globe with the help of Telstra, offering among other things a mobile high-speed internet service.

For P70 billion, the PLDT-Globe joint venture bought San Miguel’s Vega Telecom, Inc. (for P69.1 billion) and the SMC subsidiaries New Century Telecoms and eTelco, Inc. (P0.9 billion).

Thus has the death of SMC’s telco ambition enhanced the PLDT-Globe duopoly.

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3 Comments

  1. The SMC deal was just done by these oligarchs as a “protest” and a “sabotage” to Duterte’s plan to discipline and improve the telcos

  2. What’s the point letting that SMC bandwidth lay idle while waiting for SMC and Telstra to put up their own telco? That would take years. With the bandwidth already in circulation with Smart and Globe, we can hold them to their promise of delivering much improved internet within a few months.

  3. Cousin Eerie on

    This editorial glosses over the fact that both SMC and Telstra found the prospect of setting up their own telco prohibitive, which is why SMC thought it better to convert that unrealized project to P69B instead. It may be true that the legal action levelled against the NTC for fair distribution of the 700 mhz bandwidth may have played a role. But like I said, it was for FAIR distribution. With the acquisition of the 700 mhz frequency, other frequencies will be go back to the NTC for potential competitors. The only thing intimidating competition is the massive infrastructure, capex and long experience of the two major telcos.