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Telcos pin hopes on broadband services [The Manila Times, Philippines](Manila Times (Phillipines) Via Acquire Media NewsEdge) Oct. 11--AMID a maturing market and cutthroat competition, telecom companies are shifting their focus to mobile and fixed line broadband services to squeeze more revenues from their subscribers. Gamaliel Cordoba, National Telecommunications Commission (NTC) chief, said that there is still room for expansion in traditional mobile phone services, but broadband is the next growth area for the industry. He projected that the number of broadband service subscribers will continue to register three-digit growth in the next two to three years. The country's broadband subscribers stood at 3.6 million last year, up by 102.81 percent from the 1.77 million in 2008. "This is where the future lies," Cordoba said. He, however, said that mobile phone subscribers will still register a double-digit increase by the end of this year. In 2009, the country's cellular phone subscribers hit 77.04 million, up 13.14 percent from the 68.09 million the year before. In the first six months, the country's total mobile phone subscribers hit more than 80 million. 96 percent penetration Marc Einstein, industry manager ICT Practice of Frost & Sullivan in Asia and Pacific, said there is still growth in the Philippine telecom industry despite the near maturity of the market. "The mobile penetration rate in the Philippines is about 80 percent in the beginning of the year. It should be 96 percent by the end of the year. So, we are seeing the market get relatively saturated," he said. Einstein said some growth is likely because many of those in the 96 percent carry two or three subscribers identification module (SIM) cards. By 2015, the country's mobile penetration rate is expected to hit 126 percent. Einstein likewise said future growth will be driven by mobile broadband Internet services. He said mobile data in the Philippines is over 50 percent of average revenue per user (ARPU) with non-messaging at an estimated seven percent. The country also has the highest data use figures in this area with 54 percent of the total data use in the region coming from the Philippines. Nitin Bhat, partner at Frost & Sullivan, said global data is projected to increase to 55 percent of ARPU. He said that this increase is a result of rising voice usage, text bundling and mobile Internet adoption. Bhat, however, said mobile operators have to ensure that their back-haul networks are upgraded to cater to this increase in data traffic. Next battle ground Ovum said that mobile broadband services will be the next battle ground for the country's telcos. The research firm said the shrinking revenue of Philippine Long Distance Telephone Co. (PLDT) and Globe Telecom Inc. is the first sign of the impending market maturity caused by an ever-increasing mobile penetration rate in the country. Ovum projected that the mobile penetration rate will increase from 78 percent at the end of 2009 to 98 percent by 2015, reaching a total mobile subscriber base of 107 million. Anubhuti Belgaonkar, Ovum lead analyst said focusing on data services is typically the way to offset revenue decline. "PLDT and Globe have now shifted focus to mobile broadband to drive revenue growth, a strategy Ovum closely agrees with," Belgaonkar said. Given the low broadband penetration and the limited coverage of fixed broadband networks, Belgaonkar said mobile broadband appears to have immense growth potential in the Philippines. To capitalize on this opportunity, PLDT and Globe are focusing on reducing ownership and usage costs to encourage uptake of mobile broadband. As a result, PLDT's mobile broadband subscriber base has jumped 90 percent year-on-year to 1.4 million in June, while Globe's subscribers have increased almost two-fold to 596,000. Unlimited promos cut margins "Going forward, affordability along with adequate network coverage and capacity will be crucial for driving the uptake of broadband services in the Philippines. However, operators would have to be mindful of the associated costs to ensure that their bottom Despite the negative impact of the unlimited services, Globe and PLDT said they will continue to offer more promos to protect their respective market share. At end-2009, Globe's market share stood at 31 percent, lower than PLDT unit, Smart Communications Inc.'s 55 percent. The operator of Sun Cellular, Digital Telecommunications Philippines Inc. (Digitel), has a market share of 14 percent. The bucket pricing had started when Sun Cellular entered the market in 2003 with an unlimited call and text service offering. In response, rivals Globe and Smart created a new set of promo offerings that kept competition tight. Since then, Globe and PLDT's revenue started to shrink. "The rise in unlimited services is not a phenomenon that's specific to Globe . . . I think all of us in the industry is trying to deliver the best that we can," Peter Bithos, Globe consumer business senior adviser said. Pockets of growth "A lot of people say that in the next few years it would be a tougher telecom [industry]. That's true. It's going to be very tough. However, there are pockets of growth," Bithos said, citing the fewer number of Filipinos using mobile broadband Internet. Napoleon Nazareno, PLDT president and chief executive said the popularity of unlimited service offerings, the resurgence of voice and the growing assortment of alternative means of communication affected the bottom line of the industry. He, however, said that the decline in revenues of its cellular business was offset by the company's rising broadband business, revenues from which rose 26 percent to P3.4 billion. At end-June, the PLDT group's total broadband subscribers stood at 2.96 million. "While we believe that there is still room for growth in the broadband space, we do recognize that our core markets are maturing. We are, therefore, looking to move beyond the verticality of the traditional telco business model as we lay the groundwork for a more 'horizontal' perspective via our strategic platform and infrastructure investments," Manual V. Pangilinan, PLDT chairman said. Owned by Hong Kong-listed First Pacific Co. Ltd. and Japan's NTT Group, the Philippines' largest telco said its net income inched up by a percent to P10.26 billion in the second quarter of the year from P10.14 billion in the same period last year. Separately, Globe said its second-quarter net income reached P2.39 billion, down from P3.25 billion in the same period last year. To see more of The Manila Times, or to subscribe to the newspaper, go to http://www.manilatimes.net. Copyright (c) 2010, The Manila Times, Philippines Distributed by McClatchy-Tribune Information Services. 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