The Philippines telecoms market is somewhat limited by low consumer incomes. However, with large subscription growth opportunities, operators continue to grow rapidly, as their strategies remain focused on building subscriber bases. Over the medium term, we believe that operators may face difficulties transitioning to strategies that focus on increasing revenues from new services, such as fibre and LTE broadband. There is still growth potential, with penetration only just over 100%, leaving operators some time before pressure will build on their existing strategies. An additional factor which should insulate operator financial performance is that the shared ownership of two of the market's operators has yet to have a negative impact on pricing for subscribers. However, BMI sees the potential for long-term implications from reduced competition.
- Strong mobile subscription growth occurred in H113, resulting in an upwards revision to our forecasts. We now expect a total of 112.388mn mobile subscriptions by YE13.
- The number of fixed-line subscribers could be experiencing a sustained period of contraction due to mobile substitution. We forecast 3.78mn subscribers by end-2017, representing a 3.6% penetration rate.
- Despite the mobile market effectively being a duopoly, mobile ARPUs continue to trend lower. Without a concerted effort to move towards higher revenue-generating products and subscribers, operator ARPU will continue to fall.
Key Trends And Developments
Existing mobile operators face several challenges over the short-to-medium term. In September 2013, the Mobile Phone Subscriber Protection Act was filed, which seeks the introduction of minimum standards for the quality of mobile phone services and the monitoring of complaints. Meanwhile, they will also face additional competition, after ABS-CBN Corporation reached a deal with Globe Telecom to offer services over the latter's network. The newcomer plans to offer mobile TV services in addition to regular mobile services. New legislation and competition will ensure that established operators continue investment and innovating with services.
In H113, leading operators PLDT and Globe continued their investment in core infrastructure to support future growth. For instance, in August 2013, PLDT completed a fibre-optic expansion project worth PHP2.5bn (US$57.4mn) for supporting the launch of ultra-high speed internet services for its fixed and mobile networks. The operator deployed more than 5,000km of optical fibre cables in H113, thereby enabling its total fibre assets to reach more than 71,000km. Meanwhile, the South-East Asia Japan Cable, in which Globe is an investor, was launched in September 2013. Globe Telecom claimed the US$400mn system would boost ICT and business process outsourcing industries in Philippines.