BMI's Q212 report on the Philippines telecommunications market provides a comprehensive overview of the latest developments n the country's mobile, fixed-line telephony and internet sectors. Latest data from various telecoms operators have been incorporated but we have largely kept our forecast scenarios unchanged as the figures suggest that our expectations should hold.

Although the mobile penetration rate in The Philippines is expected to breach the 100% mark by end- 2012, we continue to expect a relatively strong growth momentum in the next few years due to the prevalence of prepaid subscribers, which helps to inflate the headline figure through multiple SIM ownership and inactive subscriptions. By end-2016, we expect more than 117mn mobile subscribers in the Philippines, representing a penetration rate of 114%. While most countries are experiencing declining demand for fixed-line services, we continue to see the number of fixed lines in the Philippines increase, which we attribute to operators' efforts to expand into underserved rural regions.

We expect the Philippine broadband industry to outperform alternative segments due to increasing consumer demand and operators' determination to tap into the growth potential by expanding and upgrading their fixed and mobile broadband networks. We envisage 10.233mn broadband subscribers in the country at the end of 2016 with mobile broadband the key growth driver.

At present, nothing much has changed since the merger between the Philippine Long Distance Telephone Company and Digital Telecommunications Philippine was approved by the regulator. However, we are anticipating drastic developments in the future such as the imminent entry of San Miguel Corporation (SMC) and the issue of Connectivity Unlimited Resources Enterprises' 3G spectrum as well as the fifth 3G licence, which has been vacant for a number of years. Besides SMC, we expect Globe Telecom and Multi-Media Telephony to be interested in the 3G licences.

The Philippines rose up BMI's Asia Pacific Telecoms Risk/Reward Ratings after its Industry Rewards score was upgraded. The Philippine economy grew at a disappointing rate of 3.2% y-o-y in Q311, falling well below the government's estimate of 3.8-4.8% on stubbornly low government spending and falling exports, and marking the second straight quarter of largely disappointing data. However, personal consumption posted strong growth, which highlights the resilient nature of the Filipino consumer, due to remittance inflows that have held up well despite a deteriorating external economic environment.

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