Some Thoughts on the Telco Business

For the longest time telco companies like Smart and Globe have relied heavily on SMS and calls for their revenues. However with the rapid and massive growth of mobile Internet, revenues from both these services, especially SMS, have plummeted. With mobile Internet and smartphones, their customers suddenly had access to “free” messaging services like Facebook, Viber, WhatsApp, and Line. Video calls also became so much easier with apps like Hangouts, Skype, and Facetime. Since these apps started eating the core of their businesses, telcos have shifted their attention from getting you to text and call more to paying for different types of content and using more data.

This is the main reason why Smart, Sun, and Globe have been trying their best to partner with popular companies for their content and services. Globe had free Facebook, Viber, and a partnership with the NBA. Smart did free Internet and just recently announced a partnership with Walt Disney (includes Marvel). These services are meant to hook more users in to data and then eventually get them to spend more by using more data and then buying premium content.

Content is just one part of the new telco business model. Another obvious service they’re gunning for is payments processing. We’ve already seen how both telcos have allowed users to buy stuff from Google Play using their prepaid or postpaid credits. This is just the first step and this business can potentially be huge. The Philippines has very low credit card penetration which limits the growth of e-commerce and mobile commerce. If the telcos manage to somehow solve this problem by making their prepaid and postpaid credits as payment methods, this will crack open the whole country for mobile and web commerce products. Telcos probably make their money with a % of every transaction. Maybe this is the reason why PLDT bought a stake in Rocket Internet?

Anyway, one thing is for sure: these are exciting times for the telcos and consumers alike. Competition will force them to bring up their game and come up with better offers. If and when they solve the mobile and web commerce payment problem, expect a lot of opportunities open up as well for local web entrepreneurship.