Philippine Telecommunications Industry
————————————————- Introduction Before the 80s, owning a telephone line is like having one’s own Mercedes Benz. People use telephones as a sign of status in the society. When a person is lined, he/she is rich, an elite member of the community. During those times, only the privileged have phones. Many would apply for a phone line, and application process can take up to 5 years, only to find out they have been rejected. In the 80s, the market became more accommodating and new telephone companies made their industry debut. New lines began operating and franchises were allowed nationwide.
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In the early 90s, about 2 of every 10 Filipino families have landline phones, with most of the lines located in Metro Manila. Less than 1 out of 10 owns a mobile phone, then appearing like a smaller version of military radiophones, but still bulky in today’s standards. Provinces still lag behind in the race during that time. The lack of telephone lines in provincial homes became a viable business for calling centers. They enjoyed these markets up to the first few years of the 21st century. And then a few years more, the cellphone age reached its peak. More carriers, lower fees, lesser restrictions, wider coverage.
Even kids have their own phones now. Landline subscription started to decline as people become more mobile, wanting to bring with them their phones thus opting for a mobile phone than a stationary one. Because of the broad scope of Telecommunications, the group has decided to tackle only the mobile or wireless communications as the main topic. Currently, the market is dominated by the Big Three in the Wireless Telecom industry namely, Smart Telecommunications, Inc. , Globe Telecom, Inc. , and Digitel Mobile Philippines, Inc. or otherwise known as Sun Cellular. ———————————————— History of the Telecommunications Companies in the Philippines * Smart Communications, Inc. * Incorporated in 1991, Smart Communications, Inc. (SMART) is currently leading the Philippines’ wireless services catering to 44. 1 million subscribers on its GSM network as of end of the 3rd quarter of year 2010. * SMART has built a reputation for innovation, having introduced world-first wireless data services, including mobile commerce services such as Smart Money, Smart Load and Smart Padala. SMART also offers 3G and HSPA services.
Its Smart Link service provides communications to the global maritime industry. Smart Broadband, Inc. , a wholly-owned subsidiary, offers a wireless broadband service, Smart BRO, with 1. 3 million subscribers as of end-September 2010. SMART is a wholly-owned subsidiary of the Philippines’ leading telecommunications carrier, the Philippine Long Distance Telephone Company. * Globe Telecom, Inc. * In 1928, Congress passed Act No. 3495 granting the Robert Dollar Company, a corporation organized and existing under the laws of the State of California, a franchise to operate wireless long distance message services in the Philippines.
Subsequently, Congress passed Act No. 4150 in 1934 to transfer the franchise and privileges of the Robert Dollar Company to Globe Wireless Limited which was incorporated in the Philippines on 15 January 1935. * Globe Wireless Limited was later renamed as Globe-Mackay Cable and Radio Corporation (“Globe-Mackay”). Through Republic Act (“RA”) 4630 enacted in 1965 by Congress, its franchise was further expanded to allow it to operate international communications systems. Globe-Mackay was granted a new franchise in 1980 by Batasan Pambansa under Batas Pambansa 95. In 1974, Globe-Mackay sold 60% of its stock to Ayala Corporation, local investors and its employees. It offered its shares to the public on 11 August 1975. In 1992, Globe-Mackay merged with Clavecilla Radio Corporation, a domestic telecommunications pioneer, to form GMCR, Inc. (“GMCR”). The merger gave GMCR the capability to provide all forms of telecommunications to address the international and domestic requirements of its customers. GMCR was subsequently renamed Globe Telecom, Inc. (“Globe”). * In 1993, Globe welcomed a new foreign partner, Singapore Telecom, Inc. STI), a wholly-owned subsidiary of Singapore Telecommunications Limited (“SingTel”), after Ayala and STI signed a Memorandum of Understanding. * In 2001, Globe acquired Isla Communications Company, Inc. (“Islacom”) which became its whollyowned subsidiary effective 27 June 2001. , In 2003, the National Telecommunications Commission (“NTC”) granted Globe’s application to transfer its fixed line business assets and subscribers to Islacom, pursuant to its strategy to integrate all of its fixed line services under Islacom.
Subsequently, Islacom was renamed as Innove Communications, Inc. (“Innove”). * In 2004, Globe invested in G-Xchange, Inc. (“GXI”), a wholly-owned subsidiary, to handle the mobile payment and remittance service marketed under the GCash brand using Globe’s network as transport channel. GXI started commercial operations on 16 October 2004. * In November 2004, Globe and seven other leading Asia Pacific mobile operators (‘JV partners’) signed an agreement (‘JV agreement’) to form Bridge Alliance.
The joint venture company operates through a Singapore-incorporated company, Bridge Mobile Pte. Limited (BMPL) which serves as a commercial vehicle for the JV partners to build and establish a regional mobile infrastructure and common service platform to deliver different regional mobile services to their subscribers. The Bridge Alliance currently has a combined customer base of over 250 million subscribers among its partners in India, Thailand, Hong Kong, South Korea, Macau, Philippines, Malaysia, Singapore, Australia, Taiwan and Indonesia. In 2005, Innove was awarded by the NTC with a nationwide franchise for its wireline business, allowing it to operate a Local Exchange Carrier service nationwide and expand its network coverage. * In December 2005, the NTC approved Globe’s application for third generation (3G) radio frequency spectra to support the upgrade of its cellular mobile telephone system (“CMTS”) network to be able to provide 3G services. The Company was assigned with 10-Megahertz (MHz) of the 3G radio frequency spectrum. On 19 May 2008, following the approval of the NTC, the subscriber contracts of Touch Mobile or TM prepaid service were transferred from Innove to Globe which now operates all wireless prepaid services using its integrated cellular networks. * In August 2008, and to further grow its mobile data segment, Globe acquired 100% ownership of Entertainment Gateway Group (“EGG”), a leading mobile content provider in the Philippines. EGG offers a wide array of value-added services covering music, news and information, games, chat and web-to-mobile messaging. * On 25 November 2008, Globe formed GTI Business Holdings, Inc. GTIBH) primarily to act as an investment company. * On October 30, 2008, Globe, the Bank of the Philippine Islands (BPI) and Ayala Corporation (AC) signed a memorandum of agreement to form a joint venture that would allow rural and low-income customers’ access to financial products and services. Last October 2009, the Bangko Sentral ng Pilipinas (BSP) approved the sale and transfer by BPI of its shares of stock in Pilipinas Savings Bank, Inc. (PSBI), formalizing the creation of the venture. Globe’s and BPI’s ownership stakes in PSBI is at 40% each, while AC’s shareholding is at 20%.
The partners plan to transform PSBI (now called BPI Globe BanKO, Inc. ) into the country’s first mobile microfinance bank. The bank’s initial focus will be on wholesale lending to other microfinance institutions but will eventually expand to include retail lending, deposit-taking, and micro-insurance. * There was no bankruptcy, receivership or similar proceedings initiated during the past three years. * Digitel Mobile Philippines, Inc. * Digitel Mobile Philippines, Inc. (DMPI) is one of the Philippines’ leading mobile telecommunications companies.
It was established by DIGITEL in September 2001 to provide wireless public and private telecommunication services. On March 29, 2003, DMPI commercially launched its wireless mobile services under the Sun Cellular brand. Sun Cellular offers the latest in GSM technology, providing voice services (local, national, international calling), messaging services (short text or multimedia messaging), outbound and inbound international roaming, broadband wireless technology, and value-added services such as Mobile Internet, and up-to-date downloadable contents like ringtones, dialtunes, picture messages, and logos.
Sun Cellular pioneered the 24/7 intra-network unlimited wireless services by introducing 24/7 Call and Text Unlimited (CTU) and 24/7 Text Unlimited (TU) services in Philippines’ mobile telecommunications industry. DMPI is part of the JG Summit Conglomerate, which has business interests in air transportation, banking, food manufacturing, hotels, petrochemicals, power generation, publishing, real estate and property development, and telecommunications. ————————————————- Review of Related Literature This section presents the literature the researchers assessed before they conducted their study.
Furthermore it represents some issues and concepts in line with the objective of the study. Digital Review of Asia Pacific (Philippine Telecommunications). According a study conducted by the following; Lorraine Carlos Salazar, Shelah Lardizabal-Vallarino and Zorayda Ruth Andam, NTC says that the Philippines’ telecom regulator, in 2005 Filipinos sent an average of 500 million text messages per day in 2006, double the number of text messages that they sent daily in 2005 (Amojelar 2007). Indeed, the Philippines is the undisputed ‘SMS capital of the world’. Ninety-five per cent of the 42. million mobile phone subscribers in the Philippines use their phones for text messaging. In a country where computer and Internet penetration remains very low, text messaging is the equivalent of e-mail and instant messaging. It has become an indispensable communication tool for social relations and corporate and government transactions. Indeed, the number of mobile phone owners in the Philippines has grown by leaps and bounds in the past five years alone. From a teledensity of less than one per 100 people between 1970 and 1990, the Philippines achieved a fixed-line teledensity of 4. 18 per 100 people and a mobile phone density of 49. 9 in 2006. This came about from rapid technological advances and intense competition following a liberalization drive that transformed a monopoly into one of the most profitable and highly competitive economic sectors. However, while telecommunications infrastructure is one of the success stories in information and communication technologies (ICTs) in the Philippines, much more needs to be done in terms of ICT access, opportunity and utilization. Today, there is an increasing consensus that ICTs have the potential to bring about social, economic and political change and development when people have access to them.
ICTs can be utilized to help reduce poverty and socio-economic disparities by bringing the traditionally marginalized within reach. Development practitioners generally agree that ICTs need to be integrated systematically into poverty reduction strategies. There is a need to go beyond small pilot projects into larger national or regional implementation of ICT programmes. And multi-stakeholder partnerships between government, civil society and the private sector must be created to share specific competencies and resources (Weigel and Waldburger 2004). ICT infrastructure.
After over a decade of liberalization, the Philippine telecommunications sector has produced a highly competitive environment with 74 local exchange carriers, 14 inter-carrier carrier services, 11 international gateway facilities and seven cellular telephony providers. While the former virtual monopolist, PLDT, continues to dominate the fixed-line sector, and its wireless subsidiary Smart Communications Inc. is the leading cellular phone company, the presence of two major competitors makes mobile telephony the most competitive and fastest growing sector. In 2005, the Philippines had a total of 42. million mobile telephone subscribers, the third highest mobile phone density in ASEAN, next to Singapore and Malaysia. In stark contrast, fixed-line teledensity in the Philippines (4. 18 fixed-line telephones per 100 people) is the fourth lowest among ASEAN countries, ranking only higher than Cambodia, Laos and Myanmar. 1 Intense competition among the mobile phone companies has resulted in affordable mobile services and innovative packages, including prepaid services. The latter, introduced by Globe Telecommunications, has made mobile phones affordable to lower income groups.
The first mobile phones introduced in the 1990s used analogue technologies. Their uptake was slow because of the high cost of handset and service, as well as poor billing and cloning problems. Philippine telcos then shifted to 2G technologies. By 1999, GSM had become the dominant technological standard in the country. As of the end of 2005, three 3G licenses had been issued. The top two companies, Smart Communications Inc. and Globe Telecommunications, started offering 3G services in early 2006. As mobile teledensity increased, it became clear that Filipinos were not using their mobile phones for voice calls.
Instead they were using their phones for SMS (short messaging service) or text messages. Analysts estimate that ‘texting’ (SMS) in the Philippines exceeds voice traffic by a factor of 10 to 1. Mobile phone companies earn about half of their revenues from these non-voice services. For instance, in its 2005 financial report, Smart earned PhP 36. 8 billion (USD 707 million) from data services whereas its revenues from voice services totalled PhP 34. 3 billion (USD 659 million) (PLDT 2005). Corporate data are supported by consumer surveys.
A June 2003 survey found that 94 per cent of mobile telephone subscribers use their phones for text messaging. Of these, 70 per cent send about 10 messages per day and about 14 per cent send between 10 and 20 messages per day. Given the average of 250 million text messages a day, at two US cents per message, telcos in the Philippines earn a hefty USD 5 million per day on text messaging alone! In 2006, the volume of text messages increased significantly more than the three-million increase in mobile phone subscribers. A key factor here was the entry of a third niche player, Sun Cellular, which began operations in 2004.
The decision to open the market to Sun Cellular despite protests from the major players, Smart and Globe, can be credited to NTC. Often criticized for lack of independence, the regulatory body surprised many when it allowed Sun Cellular to offer discounted prices for its services. The other mobile phone companies had no choice but to offer lower tariffs and unlimited texting packages, which in turn led to subscriber gains. The liberalization of the telecommunications industry has led to economic and social gains. Both corporate and individual users are benefiting from the increased competition among providers.
Market competition and new technologies are driving developments in the telecommunications sector, making it a growth engine for the country’s development. In 2005, the sector accounted for 4 per cent of GDP and 6 per cent of total tax receipts. Telecommunications companies are also the most profitable and actively traded companies in the Philippine Stock Exchange. In terms of its contribution to social development, the liberalized telecommunications sector is providing connectivity to millions of overseas Filipino workers, enabling them to keep in constant touch with their families.
While the picture is rosy for telecommunications, the same is not true for personal computers (PC) and Internet penetration and utilization. The International Telecommunications Union (ITU) estimated about 3. 5 PCs per 100 inhabitants in 2003 and 4. 5 per 100 inhabitants in 2004. Unpublished data from the 2003 Family Income and Expenditures Survey (FIES) of the National Statistics Office (NSO) indicate that only about 4. 4 per cent of households own a PC, whereas 52. 7 per cent own a television, 75. 2 per cent own a radio, and 14. per cent own a fixed-line or cellular phone (Astrologo 2006). With regard to the Internet, while broadband and broadband wireless services have been introduced in the past couple of years, dial-up Internet is still the most widely used type of Internet access. NTC reported a total of 1. 44 million Internet subscribers for the 177 registered Internet service providers (ISPs) in 2005. The ITU estimate for 2005 was 4. 4 million Internet users or 5. 32 users per 100 Filipinos. This number is disappointingly lower than Iran’s (10. 07 per 100 population) or Zimbabwe’s (10. 08 per 100 population).
While the available data seem to point to low utilization, it is also true that there is a gap in the official data on Internet use. The most recent official information comes from the NSO’s Functional Literacy, Education and Mass Media Survey (FLEMMS) conducted in 2003. The FLEMMS study found that the Internet is a source of knowledge and information for about 13. 8 million (20 per cent of the population) Filipinos aged six years and above. Of these, only 7. 4 per cent access the Internet for information daily. On the other hand, there has been a marked increase in the number of Internet cafes, telecentres and other public access points.
Indeed, one of the biggest challenges in understanding how ICT has changed, is changing and will change the daily life of Filipinos is collecting accurate data on ICT utilization. The government needs to ensure that its policy decisions are based on real and up-to-date figures. However, there is a lack of funding for ICT statistical collection (Astrologo 2006). In 2000, the National Statistical Coordination Board (NSCB) created a Task Force on the Measurement of e-Commerce to develop a framework and to identify methodologies and strategies for the generation of data and other indicators of electronic commerce.
The Task Force found that official statistics on ICT utilization are sorely lacking. In 2002, the NSO, in collaboration with the Information Technology and E-Commerce Council (ITECC, now the Commission on ICT), conducted the Survey on Information and Communication Technology of Philippine Business and Industry, the first attempt to collect and generate benchmark information on the availability, distribution and utilization of ICTs by business establishments in the country.
However, due to funding constraints, the survey has not been repeated. And no study of public ICT utilization has been undertaken. Philippine Telecom Market continued to expand in 2005 and will become even more competitive in the coming years. According to IDC’s press release he Philippines telecom market made a remarkable performance in 2005 with mobile services market as the most dominant segment taking 66% share of the market pie. Such a market share, however, slightly declined from last year’s 67%.
Based on IDC’s latest research, Philippines Telecommunications Services 2006-2010 Forecast, although the mobile services market continued to expand in 2005, its growth pace is slower in terms of revenue as compared to its performance in 2004. Nonetheless, the slowdown in 2005 was blamed to several activities initiated by the operators in the areas of subscriber recognition and pricing rather than to a contraction in market demand. Meanwhile, the fixed-line services market continued its recovery in 2005, registering a tremendous improvement considering that the market suffered a blow in 2003.
The report also shows that year 2005 provided a milestone for data services, as these finally surpassed voice services in terms of total market revenue contribution. The growth was driven by the increased strategic focus of operators, the growing market of connectivity and the growing sophistication of end-user telecom requirements combined with various promotions for voice rates in both fixed and the mobile segments. Moving forward, the marketplace will continue to be even more competitive.
IDC advises market players to continue strengthen partnerships for content and VAS positioning and be more flexible in responding to the changing business dynamics of their customers. “As price points continue to decline, SPs can no longer be dependent on incomes generated from subscriptions alone but also have to focus on offering value-for-money services. As such, SPs will have to ensure that they strive to offer high-quality services, including value-added services (VASs) at affordable prices,” says Karen V. Rondon, senior analyst, Telecommunications Services Research, IDC Philippines.
IDC’s latest research Philippines Telecommunications Services 2006-2010 Forecast examines the Philippines overall telecom services market, and discusses the major trends observed in the market in 2005, including market challenges and drivers for fixed-line and mobile services. It also provides an overview of the regulatory environment, touching on market liberalization, governing bodies, as well as recent major developments and issues. Major telecommunication companies in the Philippines today include Smart Communications, Globe Telecom, and Sun Cellular. (PRLog Press Release) – Sep 11, 2009) Smart Communications.
The one thing that Filipinos know about Smart Communications is that it is a wholly-owned mobile phone subsidiary of Philippine Long Distance Telephone Company or PLDT. Being placed as the top wireless telecommunication company in the Philippines, Smart Communications stated that it has an over of 25 million subscribers on its GSM network as of end-February 2007, this accounts for 58 percent market share across the country. Smart Communications is also known to have the most extensive and modern digital communications GSM network and infrastructure in the country, covering over 99 percent of the population.
Majority of Filipinos doesn’t know this but PLDT isn’t the only owner of Smart Communications. Ownership of the company are separated into 4 different shares, from First Pacific (31%), Nippon Telegraph and Telephone (15%), Fidelity Investments (5%), and other owners including public stocks (49%). Globe Telecom. Next to Smart Communications is Globe Telecom. Globe Telecom, or commonly known as Globe, is the second-largest telecommunications company in the Philippines. Globe’s main competitor in the fixed line telephone market is PLDT.
In the mobile telephony market, its main competitors are Smart Communications, which is owned by PLDT, and Sun Cellular, which is owned by Digitel. Digitel is also a major fixed-line competitor. Similar to Smart Communications, Globe’s ownership are also divided by several shares. This including Singapore Telecommunications (45%), Ayala Corporation (34%), and public stock (21%). Sun Cellular. Although placed as third in the wireless communication industry, Cellular Mobile Philippine Phone Sun was once known to top even Smart in the past.
This was because of their “24/7” unlimited call and text (SMS messaging) service they first offered in 2004. Cellular Mobile Philippine Phone Sun, formerly known as Digitel, wasn’t very successful in its attempts to get a share of the market. This was until their unique service called “24/7” was released. Sun Cellular gained popularity because of its “24/7” offer of unlimited text messaging and calls for a fixed price for Sun-to-Sun transactions. This led competing networks Smart Communications and Globe Telecom to offer similar but higher-cost plans.
This was because, before 24/7 Unlimited” has been launched, a majority of medium and large enterprises were spending hundreds of thousands in cellphone bill, with a minimum of P15,000/month for each operation. ————————————————- Performance of the Industry * Production * The Philippines mobile market took off back in 1999/00. In the decade since 2000 the number of mobile telephone subscribers has grown by almost 80 million and was approaching 85 million by June 2010. This report looks at the market in which this remarkable growth has taken place.
It also describes another related phenomenon – the amazing performance of SMS in the Philippines. Around 1. 8 billion SMS messages were being sent every day in the Philippines by 2009. This was the largest SMS volume in the world, the Philippines accounting for more than 10% of global SMS at one stage and the country’s mobile operators were reported to be generating the highest proportion of non-voice revenues in the world. But as an indication of the constant change in the mobile market the SMS market had started to decline in 2010 as the impact of Internet-based social networks started to have an impact on SMS usage.
This report takes a broad look at the mobile market in the Philippines and provides some pertinent statistics. * The wireless telecom companies basically offer the same services to their customers. They are shown as follows: * Voice Services * Call Types * Voice Mail Service * Call Management * Messaging Services * Local Text Messaging * International Text Messaging * Multimedia Messaging * GPRS, EDGE, HSDPA, 3G * Data * Mobile Browsing * USB Data Modem (Smart Bro, Globe Tattoo, Sun Broadband) * Financial Services * Smart Money * GCash * Load Services * E-load Auto-Load * Express-Load * SIM and Handsets Sales * Market Share * As of August 2010[update], Philippines has 86. 15 million subscribers in total, or a 94% penetration rate. * The country’s Telecom Regulator is the NTC (National Telecommunications Commission. * Elasticity * The group has determined that the industry is elastic because services or goods that have many substitutes which consumers may switch to are elastic. Advances in mode of transportation and communication accompanied by decreases in their cost have increased the size of markets over time.
Just like the two leading mobile telecommunications firms, Smart Communications, Inc. and Globe Telecom, Inc. they always beefed up their network and marketing promotions. * The most important determinant of elasticity is ease of substitution. If there are many goods substitute for the product sold in the market, elasticity for the product will be high. Moreover, if the product is a good substitute for other goods, its demand elasticity will also be high. * The need of the average Filipinos to use the internet has also provided them a suitable substitute to calling and texting.
The growing enthusiasm of the Filipinos to use the social networking sites like Facebook, Twitter, and Multiply has lessened the demand for Call and Text services offered by telecom companies. * Pricing * Smart Communications, Inc. * Plans Regular Plans (in Peso)| Gold Plans| 500| 800| 1200| 1800| 2500| 3500| Free SMS| 500| 350| 350| 450| 550| 650| Free Calls| 20| 98| 206| 344| 491| 737| Smart to Smart| P 6. 11| P 5. 60| P 5. 09| P 4. 58| P 4. 07| P 3. 56| Smart to Other| P 7. 64| P 7. 13| P 6. 62| P 6. 11| P 5. 60| P 4. 58| SMS Rate| P 1. 02| P 1. 02| P 0. 51| P 0. 1| P 0. 51| P 0. 51| IDD Rate| $0. 40| Consumable Plans| Gold Plans| 500| 800| 1200| 1800| 2500| 3500| Free SMS| 150| 200| 250| 300| 350| 400| Free Calls| -| -| -| -| -| -| Smart to Smart| P 6. 62| P 6. 62| P 6. 11| P 5. 09| P 4. 58| P 4. 07| Smart to Other| P 7. 64| P 7. 13| P 6. 62| P 6. 11| P 5. 60| P 4. 58| SMS Rate| P 1. 02| P 1. 02| P 0. 51| P 0. 51| P 0. 51| P 0. 51| IDD Rate| $0. 40| * Prepaid Rates Smart Buddy to Smart Buddy| P6. 50 per minute| Smart Buddy to Other Smart Brands| P6. 50 per minute| Smart Buddy to Smart Link Domestic/ International| P6. 0 per minute| NDD Rate| P7. 50 per minute| Smart Buddy to other network| P7. 50 per minute| Voice Mail Retrieval| P6. 50 per minute| Local Calls| P7. 50 per minute| PLDT Premium Service Calls| P10. 00 per minute| WAP via CSD| P6. 50 per minute| WAP via GPRS| P10 for every 30 minutes| SMS| P1. 00 for every 160 characters| MMS| P1. 00 per message sent (Smart to Smart) P 2. 00 per message sent (Smart to other networks)| International SMS| P 15. 00 for every 160 characters| International MMS| P20. 00 per message sent| Prepaid SMS while Roaming| P20. 00 per message| * Globe Telecom, Inc. Globe to Globe/TM| Globe to other networks| Globe to landline| National Direct Call| International Direct Call| Video IDD| Standard Call rate per minute| Php 6. 50| Php 7. 50| Php 7. 50| Php 7. 50 Nationwide| USD 0. 40 Worldwide| -| Local Video Call| Php 6. 50| -| -| -| -| USD 0. 0067/s| Standard Text Rates| Php 1. 00| Php 1. 00| -| -| -| -| * Sun Cellular (DMPI) PREPAID| i-Text| Voice Rates (per minute)| | Sun to Sun| P5. 50| Sun to other mobiles| P6. 50| Sun to landline| P6. 50| NDD| P10. 00| IDD| As low as $0. 10*/min| Text Messages| | Sun to Sun| P0. 50| Sun to other mobiles| P1. 00| International SMS| P1. 00*| Financial Performance * Smart Communications, Inc. Cellular Service Smart Communications, Inc. ’s cellular service revenues in 2008 amounted to Php87,518 million, an increase of Php5,184 million, or 6%, from Php82,334 million in 2007. Cellular service revenues accounted for 94% of their wireless service revenues in 2008 as compared with 95% in 2007. The following tables summarize key measures of their cellular business as at and for the years ended December 31, 2008 and 2007: Revenues attributable to Smart’s cellular prepaid service amounted to Php78,743 million in 2008, a 6% increase over the Php74,284 million earned in 2007.
Prepaid service revenues in each of the years 2008 and 2007 accounted for 93% of voice and data revenues. Revenues attributable to Smart’s postpaid service amounted to Php6,336 million in 2008, a 7% increase over the Php5,913 million earned in 2007, and accounted for 7% of voice and data revenues in each of the years 2008 and 2007. Voice Services Cellular revenues from voice services, which include all voice traffic and voice Value-Added Services (VAS) such as voice mail and outbound international roaming, increased by Php1,170 million, or 3%, to Php37,275 million in 2008 from Php36,105 million in 2007 primarily due to increased omestic voice revenues brought about by bucket voice offers and the growth in international call volumes, partially offset by the unfavorable effect of an appreciation of the weighted average exchange rate of the Philippine peso to the U. S. dollar in 2008 on their dollar-linked revenues from Php46. 18 in 2007 to Php44. 47 in 2008. Cellular voice services accounted for 43% of cellular service revenues in 2008 as compared with 44% in 2007. Domestic outbound and international inbound and outbound calls totalled 6,708 million minutes in 2008, an increase of 353 million, or 6%, from 6,355 million minutes in 2007.
International inbound calls totalled 2,677 million minutes in 2008, an increase of 322 million, or 14%, as compared with 2,355 million minutes in 2007, mainly due to an increase in subscriber base and strategic arrangements with telecommunication service providers in jurisdictions with a significant number of overseas Filipino workers. Data Services Cellular revenues from data services, which include all text messaging-related services as well as VAS, increased by Php3,712 million, or 8%, to Php47,804 million in 2008 from Php44,092 million in 2007.
Cellular data services accounted for 55% of cellular service revenues in 2008 as compared with 54% in 2007. The following table shows the breakdown of their cellular data revenues for the years ended December 31, 2008 and 2007: Text messaging-related services contributed revenues of Php45,285 million in 2008, an increase of Php4,020 million, or 10%, compared with Php41,265 million in 2007, and accounted for 95% and 94% of the total cellular data revenues in 2008 and 2007, respectively.
The increase in revenues from text messaging-related services resulted mainly from Smart’s various bucket-priced text promotional offerings which more than offset the decline in their standard texting services. Text messaging revenues from the various bucket plans totaled Php26,461 million in 2008, an increase of Php6,320 million, or 31%, compared with Php20,141 million in 2007. On the other hand, standard text messaging revenues declined by Php2,273 million, or 12%, to Php17,016 million in 2008 compared with Php19,289 million in 2007.
Standard text messages totaled 24,378 million in 2008, a decrease of 1,114 million, or 4%, from 25,492 million in 2007 mainly due to a shift to bucket-priced text services. Bucket-priced text messages in 2008 totaled 223,373 million, an increase of 24,047 million, or 12%, as compared with 199,326 million in 2007. The growth in bucket-priced text traffic together with revenue growth in bucket-priced text messaging is reflective of a shift from unlimited text packages to low-denominated text packages with a fixed number of SMS, resulting in improved yield per SMS and increased text revenues.
VAS, which contributed revenues of Php2,474 million in 2008, decreased by Php274 million, or 10%, from Php2,748 million in 2007 primarily due to lower usage of standard services and Pasa Load, which is a service allowing prepaid subscribers to transfer small denominations of airtime credits to other prepaid subscribers owing to the introduction of low-denomination top-ups, partially offset by higher usage of rich media services in 2008 as compared with 2007. Wireless Broadband, Satellite and Other Services
Their revenues from wireless broadband, satellite and other services consist mainly of wireless broadband service revenues from Smart Bro, Inc. (SBI), rentals received for the lease of Mabuhay Satellite’s transponders, charges for ACeS Philippines’ satellite information and messaging services and service revenues generated from the mobile virtual network operations of PLDT Global’s subsidiary. Gross revenues from these services in 2008 amounted to Php6,075 million, an increase of Php1,910 million, or 46%, from Php4,165 million in 2007 principally due to the growth in their wireless broadband business.
This was partially offset by lower satellite transponder rental revenues owing to lower rental charges and a decrease in the number of transponders being leased out as well as by the appreciation of the weighted average exchange rate of the Philippine peso to the U. S. dollar from Php46. 18 in 2007 to Php44. 47 in 2008, which adversely affected their U. S. dollar and U. S. dollar-linked revenues. SBI offers a number of wireless broadband services and had 547,090 subscribers in 2008 as compared with 301,738 in 2007.
SmartBro, SBI’s fixed wireless broadband service linked to Smart’s wireless broadband-enabled base stations, allows subscribers to connect to the internet using an outdoor aerial antenna installed in a subscriber’s home. Wireless broadband revenues contributed Php4,327 million to wireless service revenues in 2008, increasing by Php1,938 million, or 81%, from Php2,389 million in 2007. On November 22, 2007, SBI introduced SmartBro Plug-It which offers instant internet access, through the use of a wireless modem, in places where there is Smart network coverage.
Subscribers to this plan simply have to plug the data modem in order to access the internet with speeds ranging from 384 to 512 kbps. The monthly service fee of Php799 includes 40 hours per month of internet usage. A one-time charge for the modem costs Php1,200. On April 13, 2008, they launched the SmartBro Plug-It Prepaid which offers 30-minute internet access for every Php10 worth of load. Non-Service Revenues Smart Communications, Inc. ’s non-service revenues consist of proceeds from sales of cellular handsets, cellular SIM-packs and broadband data modems.
Their wireless non-service revenues decreased by Php50 million, or 2%, to Php2,004 million in 2008 as compared with Php2,054 million in 2007 primarily due to lower average retail price per SIM-pack and a lower quantity of phonekits sold, partly offset by a higher volume of SIM-packs and broadband data modems sold in 2008. * Globe Telecom, Inc. Mobile Voice For 2009, Globe’s mobile voice service revenues accounted for 50% of total mobile service revenues compared to 49% in 2008. Mobile voice revenues of P26. billion were 2% lower compared to 2008 as the growth in bulk and unlimited voice subscriptions were unable to fully offset the lower regular and IDD voice usage. During the year, Globe and TM sustained their bulk and unlimited voice offerings such as Tawag236 for a 20-minute call for P20, Globe’s P10 for a 3-minute call, and TM’s TodoTawag P15 for a 15-minute call. Globe also sustained its per-second charging promo which allows subscribers to make on-net voice calls for only P0. 10 per second.
To further drive adoption and encourage usage, Globe launched its “Walang Metro” campaign which includes a slew of unlimited product offers to provide subscribers more value services to suit their budget and needs. Globe launched the revolutionary DUO and SUPERDUO service, a two-in-one mobile and landline service, which enables subscribers to make unlimited landline-to-landline and mobile-to-mobile calls to any Globe and TM subscriber for only P499 per month for postpaid, and P35/day or P599/month for prepaid subscribers.
In addition, Globe introduced SUPER UNLI which allows 24×7 unlimited call and text to any Globe/TM subscriber nationwide for only P150 for 5 days for both postpaid and prepaid subscribers. UNLIcall is also available in selected areas, providing subscribers with unlimited intranetwork voice service for only P30/day or P100/5 days. Following the launch of its youth-oriented prepaid brand Globe Tattoo, the Company also introduced IMMORTALCALL+ – a unique bucket call and text service which includes a 5 minute call and 50 intra-network SMS with no expiry for only P15.
Globe’s mobile data business contributed 50% to total mobile net service revenues. Service revenues for the year totaled to P26,824 million compared to P28,465 million in 2008. While revenues from bucket, unlimited SMS subscriptions, and mobile browsing improved year on year, lower regular SMS and core value-added services usage declined, resulting in mobile data revenues that were 6% lower compared to 2008. To cater to the growing preference for bucket and unlimited SMS offers, Globe sustained its popular offerings such as Sulitxt, Everybodytxt, Astigtxt, UnliTxt, UnliTxt Dayshift and Nightshift and TodoText promotions.
In addition, the Company introduced pioneering offerings such as ImmortalTxt, the first and only SMS offer in the industry with no expiry period. Globe also introduced Immortal Load – a prepaid load option with no expiry which can be used for voice, SMS or mobile browsing. The SMS allocations and prepaid load will not expire as long as the subscriber maintains at least P1 in his prepaid wallet. To keep up with the needs of the growing youth segment, Globe introduced UnliChat+ which provides subscribers with unlimited intra-SMS and unlimited chat via Yahoo Messenger (YM).
In addition, subscribers can enjoy unlimited intra-SMS, a 15-minute call and 10 off-net SMS with Globe’s UnliTxt Trio. To further encourage mobile browsing usage, Globe introduced mobile internet add-on plans to provide postpaid subscribers access to the internet using their Blackberry (starting at Plan700) or using regular handsets in tiered and affordable plans (starting at Plan149). Subscribers can also enjoy unlimited surfing through Super Surf which is an unlimited browsing add-on plan for an additional fee of P1,200 per month, P220 for 5 days or P50 per day for postpaid subscribers.
For prepaid users, subscribers can choose to do unlimited browsing with Surf All Day for only P20 per day per site (including popular sites such as Facebook, Wikipedia, Plurk, Friendster, Twitter). Globe also launched entry-level iPhone plans starting at Plan399 following the launch of the new iPhone 3GS. * Sun Cellular DIGITEL service revenues are primarily derived from service connection fees and local monthly service charges and from charges generated by telephone calls that vary based on the distance, duration and time of day of the call.
With the launch of DIGITEL’s wireless service, revenues are also generated from sale of phone kits and from charges for SMS and other Value Added Services (VAS) aside from the traditional voice services. * Competitive Behaviour The Philippine mobile market has been marked by rapid growth, particularly during the early to middle part of the decade, and intense competition. The Philippine government liberalized the communications industry in 1993 after a framework was developed to promote competition within the industry and accelerate market development.
Ten operators were granted licenses to provide CMTS services and deploy the network technology of their choice – Globe, Innove (previously Islacom), Bayantel, CURE, Digitel, Extelcom, MultiMedia Telephony, Next Mobile (NEXTEL), Piltel and SMART. Eight operators continued on to operate commercially except for Bayantel and MultiMedia which have yet to roll out their CMTS services commercially. Since 2000, the mobile communications industry experienced a number of consolidations while new players continued to enter the market.
PLDT acquired and consolidated SMART and Piltel in 2000 while Globe Telecom acquired Islacom. In 2003, Digitel formally launched its mobile service under the brand name, Sun Cellular. In 2008, SMART purchased CURE and subsequently launched another wireless brand, Red Mobile. During the same year, San Miguel Corporation partnered with Qatar Telecom and bought interests in Liberty Telecom Holdings, Inc. , and announced plans to enter the mobile and broadband businesses. In 2009, Schutzengel Telecom, Inc. was granted a congressional CMTS franchise.
It recently filed an application with the NTC for a provisional authority (PA) to construct, install, operate and maintain a nationwide 3G mobile telecommunications system last February 2010. 2G licensee Extelcom may also re-enter the mobile market following a fresh injection of capital. In 2009, the mobile industry only grew 10% in subscriber/SIM terms as nominal penetration rates reached over 80%, ending with a cumulative industry base of 74. 7 million. The three key players ended the year with the following SIM shares:
With the high penetration level and increasing incidences of multi-SIM usage, competition in the mobile market remains intense. Sun Cellular entered the market in 2003 with an unlimited call and text service that has allowed it to increase its subscriber base in the past 7 years. In response to Sun’s unlimited call and text offers, both Globe and Smart responded by creating a new set of value propositions for their subscribers in the form of bucket SMS and unlimited call and text offerings to sustain overall competitiveness in the market. * Government Policies, Laws and Regulations
The Senate and House of Representatives has legislated an act for the regulation of the telecom companies in the country, namely the R. A. 7925 or otherwise known as the Public Telecommunications Policy Act of the Philippines. It is an act to promote and govern the development of the Philippine telecommunications Industry and the delivery of public telecommunications services. The administration of this act was given to the National Telecommunications Commission under the Department of Transportation and Communications and as such, it is responsible to take the necessary measures to implement the policies and objectives of the said act.
It was approved on March 1, 1995. As competition got hotter and hotter between the telecom companies, the prices or the rates of the various services the companies are offering became cheaper and cheaper, giving their customers more affordable services. But one concern most mobile phone users had was the life span of the prepaid loads that they buy. In order to protect and promote the interest of subscribers/end-users of prepaid telecommunications services, the National Telecommunications Commission promulgated the following regulatory guidelines: 1.
The expiration or validity of prepaid loads shall correspond to the amount of loads purchased. Prepaid loads with higher value shall have longer expiration or validity period. The minimum validity or expiration period of prepaid loads shall be as follows: Amount of Load Purchased Minimum Expiration |Validity Period PhP10. 00 or lower | Three (3) days More than PhP10. 00 to PhP50. 00 | Fifteen (15) days More than 50. 00 to PhP100 |Thirty (30) days More than 100. 00 to PhP150. 00 |Forty Five (45) days More than PhP150. 00 to PhP250. 0 |Sixty (60) days More than PhP250. 00 to PhP300 | Seventy Five (75) days More than PhP300 | One Hundred Twenty (120) days 2. The validity period of the prepaid load shall commence upon receipt of confirmation of the prepaid load purchased. 3. Public telecommunications entities may offer longer validity or expiry period for prepaid loads. 4. for each new load that is purchased, the amount of the unused loads earlier purchased that are still within the validity period shall be added to and accumulate to the new load.
The new minimum validity or expiry period shall be based on the sum of the new load plus the unused load. For purposes of illustration if for example a subscriber has an unused load of PhP2. 00 and a PhP10. 00 new load is purchased, the new validity or expiry period shall be fifteen (15) days. 5. Access to balance inquiry service through text messages shall be free of charge. 6. Violation of any of the provisions of this Circular shall be a ground for the imposition of fines and other appropriate penalties in accordance with law. 7.
Any circular, order, memoranda or parts thereof inconsistent herewith are deemed repealed or amended accordingly. ————————————————- Analysis of the Industry The market structure of telecommunications in the Philippines is what we regard to as oligopoly. The aforementioned is dominated by a small number of sellers. Hence, the decision of one firm is greatly influenced by the other firms. These firms are the following: Globe Telecom, Inc. , Smart Communications, Inc. and Digitel Mobile Philippines, Inc. All of their products are considered homogeneous or standardized.
This market structure comes with innumerable external hindrances that do not allow entrants easily. Some of these barriers are the following: political laws and regulations, executive order that directly assumes the direct influence of the president, which is said to be prone to subjective decision making questionable to political notion; financial requirement cited from a USTR Report on the Philippines 2009, says the Constitution of the Philippines limits the operation of certain utilities with at least 60% ownership by the Philippine citizens.
The government categorized telecommunications under as a utility thereby limiting foreign ownership to 40%. That makes these investors reluctant to do so. Additionally, foreigners are restricted to engage into any high managerial positions; patent rights and other legal fees. ————————————————- Conclusion and other Recommendations * Conclusion Based on the research, we conclude that the most profitable telecommunications company in the Philippines in term of service revenue for the year 2009 and 2008 is Smart Communications, Inc. ith total of Php77,781M and Php69,749M respectively. For the non-service revenue, Globe topped the companies with total of Php1,361M for 2009 and Php1,572M for 2008. Globe Telecom, Inc. holds the largest assets worth Php118,186M in 2009 and in contrast, Smart Communications, Inc. holds the largest amount of liabilities worth Php113,530M in 2009. Sun Cellular was the first company in the Philippines to introduce Call and Text Unlimited Services. This is the strategic plan had boosted the latter’s immediate and absolute high performance.
It is undeniable that competitors were stunned by the sudden economical change that was derived from the boldness and USP of Sun Cellular. Over the years, competitors tried to come up with innumerable strategies that could beat Sun’s performance. Whoever, they weren’t able to succeed. Hence, the only outcome seen in this occurrence was the competitors’ adaptation in the said service. Both Globe and Smart opted to offer the same service in a very distinguishable price. * Recommendation The internet is appealing to more and more people nowadays from the business ector to the households. Even mobile phones are getting affected by the increase of the internet usage in the country. The group recommends to the telecom companies to make big improvements on their broadband technology and data services especially on the bandwidth speeds that they offer to their subscribers. The untapped potential of the market is very vast and there are a lot of profitable opportunities for the companies. ————————————————- References Department of Transportation and Communications http://www. dotc. ov. ph/ National Telecommunications Commission http://www. ntc. gov. ph/ Smart Communications, Inc. http://smart. com. ph/ Globe Telecom, Inc. http://site. globe. com. ph/ Sun Cellular http://www. suncellular. com. ph/ Digitel http://www. digitel. ph/ PLDT http://www. pldt. com. ph/ http://www. gmanews. tv/story/170762/growing-mobile-subscribers-to-boost-sms-based-marketing http://en. wikipedia. org/wiki/List_of_mobile_network_operators_of_the_Asia_Pacific_region#Republic_of_the_Philippines ————————————————- Glossary G, is a generation of standards for mobile phones and mobile telecommunications services fulfilling specifications by the International Telecommunication Union. Application services include wide-area wireless voice telephone, mobile Internet access, video calls and mobile TV, all in a mobile environment with peak speeds at 200 kbit/s. 4G is the fourth generation of cellular wireless standards with speed requirements for download speed at 100 Mbit/s for high mobility communication (such as from trains and cars) and 1 Gbit/s for low mobility communication (such as pedestrians and stationary users).
Average revenue per user (ARPU) is a measure used primarily by consumer communications and networking companies, defined as the total revenue divided by the number of subscribers. Broadband refers to a telecommunications signal of greater bandwidth, in some sense, than another standard or usual signal Global System for Mobile Communications (GSM) is the most popular standard for mobile telephone systems. Oligopoly is a market form in which a market or industry is dominated by a small number of sellers.
Telecommunications is any process which enables a telecommunications entity to relay and receive voice, data, electronic messages, written or printed matter, fixed or moving pictures, words, music or visible or audible signals or any control signals of any design and for any purpose by wire, radio or other electromagnetic, spectral, optical or technological means. Value-added service (VAS) is a telecommunications industry term for non-core services, or in short, all services beyond standard voice calls and fax transmissions. ————————————————- Appendices