An interesting perspective from a telco industry bigwig; read first before venting out your views, folks!
The Philippines is better off with only two, profitable, major telecommunications companies, said a telco industry executive.
Sean Gowran, president and country manager of telco network operator Ericsson Philippines weighed in on the issue, noting that while additional telco players in the country would benefit consumers with more choices, having only two major players allows revenue to be concentrated enough to support the massive expenditures and investments that come with the business.
Gowran commented that in the Philippine telco landscape, PLDT and Globe Telecom are currently “engaged in [a] fierce competition that forces them to pour massive investments to improve their network infrastructure as they seek to improve the quality of their service to consumers.”
“Thirty percent of their revenue were spent on network infrastructure, so that means they are competing, and they are competing for the same number of subscribers,” Gowran said in his presentation on “Investment and Bandwidth Management” at the recent Philippine Telecoms Summit at the PICC in Pasay City.
“We don’t have an investment problem, we have a revenue problem. Philippine operators’ CAPEX (capital expenditures) intensity has been among the highest,” he added. In the presentation, Gowran mentioned that local telco providers have been investing their revenue in infrastructure and technology at a significantly higher rate than the global average.
According to Philstar: “Neighboring ASEAN countries such as Thailand and Myanmar put back 20 percent of their revenues into capex over the same period, while Vietnam’s ratio was at 17 percent. Countries such as Singapore and Malaysia were even lower, with a capex level of less than 15 percent. Only Indonesia spent more than the Philippines at 27 percent.”
The Ericsson country manager also shared his doubts on the financial viability of a third player entering the Philippine market at this point in time. According to their estimates, a third major telco would need to invest at least P500 billion just to catch up with PLDT and Globe and get a fair share of the consumer market. Even if the new telco company manages to set up within five years, it’ll have to weather many more years of operation before it can finally recover the half-trillion investment.
Gowran further expanded that at the recently-concluded Mobile World Congress 2017 in Spain, there was a discussion on the disadvantages of having four or more telcos in a country. In the panel, GSMA chairman and Indian telco tycoon Sunil Bharti Mittal said that a country only needed at most three major telco operators. Smaller countries should only have two, at best.
Mittal’s statement, according to Gowran, refers to the ideal telco industry scenario, where there is still enough revenue to be shared among the players – enough for the companies to be profitable, and be able to reliably maintain and regularly improve their services.