PH market not viable for 3rd player, telecom study shows

PH market not viable for 3rd player, telecom study shows

- in Technology

Unless the government takes the cudgels, it will be hard for the Philippines to open up doors for new players in the telecom sector.

This was how famed UP Professor Emeritus Dr. Epictetus Patalinghug explained the result of his research conducted with three other UP professors.

In a recent speech at the Asian Institute of Management (AIM), Patalinghug said crucifying the current Globe versus PLDT rivalry is both unfair and illogical.

He said it is not viable for foreign telecom investors to enter the Philippine market considering the existing law that prohibits major foreign ownership of a company and the massive capital requirements to bridge the gap that the two existing telcos have already built over the last few decades.

A third player may have a difficult time attaining financial viability in the short run due to its late-mover disadvantage and the need to penetrate undeveloped areas whose deployment cost is higher than the almost saturated urban markets dominated by the incumbents,” Patalinghug said.

The question is, do we need a new player? Looking at Digitel when they were around, they were not making a lot of money. Our analysis is that a third player can enter the market if it is cost insensitive for the next 10 to 15 years. No private firm can afford that,” he added.

Patalinghug said the Philippines is not alone when it comes to a two-player telecom structure with Myanmar as the other while India, the second most populous country in the world, will also join the list in the coming months.

Look at the market in India. If you look at the last report, India will move from a four player industry, they are merging into a two-player tele-commerce… The only thing is when we have two (players), there is fierce price competition,” Patalinghug said.

Patalinghug also said that during the mid-90s, the Philippines had 11 telco players.

In 1992 to 1996, we had 11 telco players in this industry. But deregulation has always been followed by consolidation. So Smart was bought by PLDT, Islacom was bought by Globe, Bayantel was bought by Globe, Sun was bought by PLDT, so from deregulation you have some consolidation,” he said.

And that pattern exists all around the world, India started with six, India in the next few years will only have two,” he added.

Patalinghug said he believes that the only workable solution for the country to have a new competitor is for the government to put up its own telecommunications company.

The only realistic third player is the government, but its social value is its cost-insensitive capacity to pour investments in ‘last-mile’ and high costs areas, and to build ‘last-mile’ network that complements with existing networks,” he said.

Still, Patalinghug has his own apprehensions. “There are historical examples of government failures in direct provision and operation of utility services,” he said.

Meanwhile, the government through the newly established Department Information and Communications Technology (DICT) will begin to build cell sites in different parts of the country, particularly in remote areas.

But DICT Undersecretary Eliseo Rio Jr. said this is mainly to help address the lack of cell sites in the country and does not yet signal the birth of a state-owned telecom company.

The government will build and then lease these cell sites to small players or to interested telcos. Our government (will not yet operate these structures), taking from the experience of Telepono sa Barangay which was not a success. So maintenance and usage of these cell sites will be better off with the private companies,” Rio said.

The government’s approach is technology neutral, so everything that we can build should give cost effective transmission of communication facilities,” he added.

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