AnalysisIssue 02 - 2021MAGAZINETelecom
gbo-analysis-philippines-telecom

Philippines telecom: No longer a duopoly

Dito Telecommunity's entry into the market ends Globe Telecom and PLDT’s duopolistic holds in the market

The telecom sector in the Philippines was heavily dominated by two telcos- Globe Telecom and Philippine Long-Distance Telephone Company (PLDT). However, in 2021, we witnessed a new telco enter the market and end the long-standing duopoly in the Philippines telecom market. The new player- Dito Telecommunity is a consortium of Davao businessman Dennis Uy’s Udenna Corporation, it’s subsidiary Chelsea Logistics Corporation and Chinese state-owned China Telecommunications Corporation. The telco was challenged by the President of the Philippines Rodrigo Duterte to become the third major telecommunications player in the Philippines and bring an end to the duopoly of PLDT and Globe Telecom. Earlier known as Misatel, the company rebranded to Dito after being granted a licence to operate in the Philippines.

Until last year, the telecom market in the Philippines was split between the two players that offered similar pricing. In 2020, Globe Telecom had around 97 million mobile service subscribers and around 2 million broadband subscribers, whereas, PLDT had around 72 million mobile subscribers and 2 million broadband subscribers. While PLDT is backed by Japan’s NTT Group and Hong Kong-listed First Pacific, Globe Telecom, on the other hand, is a joint venture between the Philippines’ Ayala and Singapore-based telecom giant Singtel.

Given the dominance of the two telco giants, new entrants did not dare enter the market and challenge Globe Telecom and PLDT. Foreign telco giants too were hesitant due to restrictions on foreign ownership. Due to the lack of competition in the sector, Filipinos have often suffered from disruptive networks and slow internet connections. It is also worth mentioning that the Philippines has the highest number of social media users in the world. Hence, moderate internet speed is sought after by the tech-savvy Philippine population. In terms of internet speed, the Philippines ranked 107 with an average mobile internet speed of around 15 Mbps. This is significantly slower than the global average.

The entry of Dito Telecommunity into the Philippines telecom sector is expected to help better the telecom services in the country. Both Globe Telecom and PDLT will ramp up their services to stay competitive and not lose customers to the new entrant. Also, the introduction of 5G in the Philippines is welcoming news for Filipinos, however, accessibility is going to be an issue, given the country’s geography.

The new player in town

Dito Telecommunity was set to launch its services last year, however, the launch was delayed due to the coronavirus pandemic. The telco passed the technical audit in February 2021, which was also scheduled to take last year but was postponed due to the pandemic. The telco finally launched on March 8, 2021, and initially, its services were available in 17 cities across the country. While Dito initially vowed to provide an average broadband speed of 27 megabits per second, the technical, which was conducted by independent auditor R.G. Manabat and Co., revealed that Dito’s average broadband speed hit 507.5 Mbps for 5G, and 85.9 Mbps for 4G.

With regard to Dito’s launch, Commissioner Johannes Bernabe of the Philippine Competition Commission said, “That, of course, will also require our close monitoring to ensure the allocation of a significant amount of 5G frequency given to it will also redound to the benefit of consumers, such as their commitments under the terms of reference to ensure a timely and speedy implementation of the roll-out of the telecoms services that they undertook to provide will be again complied with.”

According to state regulator National Telecommunications Commission, Dito’s network covered 37.48 percent of the national population. That slightly exceeds the 37.03 percent that Dito promised in 2018. Recently, it was reported that the telco is planning to grow its subscriber base to nearly 2 million by the end of this year. In April, it expanded its services to 21 more cities, including 18 in Luzon. In a statement, Dito said that its services were available in Lipa City (Batangas), Malvar (Batangas), Santo Tomas (Batangas), Tanauan (Batangas) and Silang among others.

Dito’s ambitious 5-year plan

Dito Telecommunity recently launched its services in Manilla and has already covered 100 cities in the Philippines. The telco’s services will be accessible to 51 percent of the million Filipino population, which stands nearly around 198 million, by end-July. The telco’s ambitious 5-year plan includes capturing 30 percent of the Philippines telco market. The company expects to have around 40 to 50 million unique mobile subscribers by the end of that period. Capturing a market share which is dominated by Globe Telecom and PLDT is not going to be an easy task. The company also plans to hit profitability by the end of its 5-year plan.

To achieve the ambitious targets, Dito Telecommunity needs to overcome a few challenges. One big challenge is that of compatibility. According to Rodolfo Santiago, chief technology officer at Dito, the telco has established a new technology and some brands are not compatible with its services. Even though there is active Dito signal, the network tends to be weak, Santiago revealed. However, they tend to overcome this constraint soon.

Most recently, the President of the Philippines signed on Republic Act No. 11537. This means the telco can now operate its network until 2046. Previously, it had permission to operate until April 2023. According to the telco, now it will be able to undertake construction activities, install devices, establish, operate and maintain for commercial purposes and in the public interest, radio or television broadcasting stations in the Philippines for another 25 years.

Why Dito is important for the Philippines?

Prior to the arrival of Dito Telecommunity, both Globe Telecom and PLDT were running a form of duopoly in the market. As a result, there was a lack of competition in the market. This means there was no open market dictating the terms and Filipinos were paying expensive prices for services that were not up to the desired standards. In a duopolistic market, the two players often co-decide on the prices and products and public opinion often takes a back seat. Compared to its neighbouring countries in the Southeast Asian region, Filipinos were paying much higher prices for the services rendered.

Competition brings out the best among the players in an industry and due to the lack of it, Globe Telecom and PLDT were largely unresponsive to the country’s need for improved internet service. As both the telecom giants seek to launch 5G technology, scalability and timeframe of the launch might be longer than expected. However, the arrival of Dito Telecommunity will change all that. Clearly, the new telco will play an important role in the Philippines’ telecom sector, 5G deployment and improving internet service. This is because the arrival of Dito means competition in the market, and this will force the other two telcos in the country to up their game and offer competitive prices and improved services.

Many Filipinos expect the third telco in the country to play a key role in improving the poor internet connectivity. If Dito Telecommunity proves to be a reliable internet service provider, then it can emerge as a challenger in a market that is dominated by Globe Telecom and PLDT. Dito could also take advantage of the National ICT Ecosystem Framework (NICTEF) which outlines the country’s ICT agenda in the next five years. In essence, NICTEF replaces the Philippine Digital Strategy Initiative 2011-2016, identifies trends in the ICT industry, strategic thrusts and indicators that the government will be looking out for.

5G in the Philippines

Experts believe the introduction of a third telco in the Philippines will play a key role in improving the poor internet connectivity in the country. Dito Telecommunity can prove to be a disruptive force in the market. However, currently, we are in the age of 5G. Both Globe Telecom and PLDT have moved ahead with their 5G plans.

Globe Telecom, which is the biggest telco in the Philippines, has already launched its 5G services in the country. It launched its 5G services in June last year by utilising the new 3.5GHz spectrum. Earlier this year, the telco announced that it plans to expand the 5G network at over 1,000 sites in the Philippines. Services will be available during the second quarter of 2021 in Mindanao and Visayas, the second and third largest islands in the Philippines.
For this, Globe has signed a contract with Finnish multinational telecommunications, information technology, and consumer electronics company, Nokia. According to the deal, Nokia will provide Globe Telecom with equipment and services from its comprehensive 5G AirScale portfolio to build out the Radio Access Network (RAN), including base stations and other radio access products.

Globe’s competitor PDLT’s wireless arm, Smart Communications also announced earlier this year that it has installed more than 1,400 5G sites in the country, which is ‘by far the most extensive in the country’, according to the company. Its 5G service is now accessible in areas such as Benguet, Misamis Oriental and Zamboanga Sibugay among others. It also has sites in Pampanga’s New Clark City, Cavite, Laguna and Rizal. While Globe has joined hands with Nokia, Smart Communications have reportedly partnered with the likes of Huawei and Samsung for its 5G deployment in the Philippines.

Last month, PLDT announced that it expanded its 5G network to over 2,600 sites in the Philippines. The company said in a statement, “This comes as Smart unveils its most powerful 5G offering dubbed ‘Unli 5G’ and ramps up its 5G outdoor coverage in the National Capital Region to more than 90 percent. Based on consumer-initiated tests taken using Speedtest by Ookla, Smart has consistently posted the fastest 5G speeds for Q1 2021, with median download speeds of 190 Mbps, more than double the competition’s speeds for the same period.”

Exploring 5G potential

5G is the technology of the future and currently, it is perceived as something that can revolutionise the global economy. Researches are funding across the globe how 5G can help improve different sectors be it oil and gas or fintech. For a layman, 5G could mean improved internet speed. GSMA revealed that the fastest 5G networks are expected to be at least 10 times faster than 4G LTE. Even though 5G speed is expected to be super-fast, much of it will depend on external factors such as location and network traffic. 5G does have the potential to meet the demands of the Filipinos who have been calling out for improved connectivity and better internet speed. However, since the Philippines is an archipelagic country with nearly 7,640 islands, much will depend on scalability. Data shows by May 2019, 4G was accessible by 72 percent of the population.

However, the benefits of 5G are not limited to just internet speed. A full-fledged 5G network would mean improved connectivity which will contribute to the economic development of the Philippines. To give you a better perspective, we can say that 5G will not only improve the Philippines’ internet speed, but it can also improve its gross domestic product (GDP). No doubt a nationwide rollout of 5G will allow more Filipinos to enjoy higher internet speed on their devices. An increase in speeds will also empower people and increase productivity, which will boost the economy.

Said that, a full-fledged nationwide 5G deployment is challenging and will take time. Globe Telecom 4G deployment took around three to four years. Given the population is scattered across more than 7500 islands, it is not an easy task. While a full-fledged 5G deployment might take about the same, if not longer. Also, now the whole world is dealing with the coronavirus pandemic, which only adds to the difficulty.

Could global disruptions and Covid-19 disrupt sector growth?

Even though the global recession and the coronavirus pandemic have slowed down 5G deployment in the Philippines, the outlook of the industry is still positive. The pandemic has heightened the need for digitisation, automation, and a cloud-first type of IT infrastructure for businesses, all of which are services that telcos are providing.

As a result of the lockdown measures and stay-home policies adopted to curb the spread of the Covid-19, many telecom players in the Philippines, especially internet service providers have benefitted from a surging demand. This means the telecom sector in the Philippines is performing well compared to other sectors such as aviation, tourism and hospitality and oil and gas, which have been battered by the pandemic. In short, Covid-19 restrictions have not hindered the telecom sector in any disruptive way. The increasing demand for voice or data has strengthened the financial conditions of many internet service providers.

Given the Philippines has the highest number of social media users in the world, it means more and more data are going to be consumed amid the pandemic as people will spend additional time on their devices surfing the net, socialising online or streaming videos. So, in 2021, telcos across the world are going to fare very well given there are not going to be any negative disruptions to demand this year. As long as the telcos have the balance sheet strength to be able to continue rolling out their services, they should do fine.

The pandemic has stopped construction activities within the sector last year. Even though Covid-19 restrictions were lifted eventually, the sector still faced problems due to limited or no supply of materials and construction equipment, particularly those imported from China. The construction delays are going to impact businesses, but they are expected to be short term and activities are expected to pick up this year.

Related posts

Can neobanks be profitable?

GBO Correspondent

Hidden tech hub: The gem called Africa

GBO Correspondent

Expo 2020 Dubai a driver for UAE economy

GBO Correspondent