SONA 2018: Another promise to end the Telecom duopoly, but when?

There is again promise of ending the reign of Globe and Smart in the Telecom business. Theis has been a steady process. Before today’s announcement at the State of the Nation address in Parliament, the Duterte Administration offered the same promise last year, and the Duterte administration has proposed this before. Therefore, this isn’t new, but more about when and who want into the business. First, read the passage of today’s speech concerning the industry, second, seeing the ancient ordeal between the duopoly and third, the DICT proposed third company into the market.

“My administration remains firm in its resolve to ensure that the country’s telecommunications services are reliable, inexpensive and secure. A draft Terms of Reference for the entry of a new, major industry player is at hand. The terms will be fair, reasonable and comprehensive. It will be inclusive so it will be open to all interested private parties, both foreign and local. The only condition is that the chosen entity must provide the best possible services at reasonably accessible prices. However, our efforts to usher in a new major player shall be rendered futile if we do not improve its odds of success in an industry that has long been dominated by a well-entrenched duopoly. We shall, therefore, lower interconnection rates between all industry players. Not only to lessen the cost to the consumers as it will also lower the costs [for the] incoming player to access existing networks, [thereby creating] a market environment that is more conducive to competition. This is a policy which is crucial to ensure that our solution to our telecommunication problems will be both meaningful and lasting. In the last 2 years, experience has taught me that lack of consultation or insufficiency of information can, at times, lead to rash judgments. If and when I am unsure on the most appropriate course of action to take given the problem, it’s factual milieu and the desired end, I never fail to consult to discuss options with persons whom I trust and whose advise I value” (Rodrigo Duterte SONA 2018, 23.07.2018).

Globe Telecom, Inc. was registered in the Securities and Exchange Commission in 1935. It claims to provide mobile and broadband services to 55 million people. The owners of Globe include foreign company Singapore Telecom (SingTel) and Ayala Corporation, with Jaime Zobel de Ayala as the company’s chairman. Smart, meanwhile, is wholly owned by Manuel V. Pangilinan’s Philippine Long Distance Telecommunication (PLDT) Company. It claims more than 68.9 million cellular and broadband subscribers. In his book Colossal Deception, How Foreigners Control our Telecom Sector, journalist Rigoberto D. Tiglao said the biggest controlling stockholder in PLDT is actually Indonesian mogul Anthoni Salim through his HongKong-based company First Pacific, where MVP sits as managing director and chief executive officer” (Reporters Without Borders – ‘PCC scrutinizes Globe, PLDT deal’, 2016).

“As previously reported by CommsUpdate, earlier this month Eliseo Rio, Jr said that the naming of the much anticipated ‘New Major Player’ (NMP) could take place by the end of September or early October this year, barring unforeseen setbacks. DICT published its draft terms of reference (TOR) for the selection of the NMP to challenge dominant players PLDT and Globe Telecom on 26 June. The selection process has been delayed for months – an original March 2018 deadline proved unrealistic – but DICT has now released details on how it plans to assign valuable 3G, 4G and potential 5G mobile frequencies to allow a newcomer to challenge the status quo. Pursuant to the above, DICT held public consultations on 6 July – a process that seemingly concluded that of those that expressed an interest in the selection process, 75% prefer a points-based allocation system, using the HCLoS method. Only 8% of potential bidders preferred the second set of draft rules which entailed auctioning the frequencies with a minimum bid of PHP36.58 billion (USD583.4 million)” (Telegeography – ‘DICT official throws support behind HCLoS to select third telco’ 17.07.2018).

It seems like the Administration is struggling to find someone who will find it profitable and even possible to breach the duopoly at this point. As the Smart and Globe owns the market and shares, they have the infrastructure and the means to control it. Therefore, they are nearly holding the same shares of the market and also the profits from the segments. Surely, many has both, as the black-outs and other forces them to have second sim-cards to secure their communications themselves.

Especially also with the strict ownership rules and regulations in the Philippines, plus the strength that Globe and Smart have, it will be tricky to gain profits at first. There are reports of China Telecom, ZTE from China and also Korean PT&T. But nothing of that is certain at this point and whoever it might be. Will have a challenge.

This will not just be about having a third competitor into the telecom market, but also coming in as a ugly step-child where two companies are ruling all supreme. Unless, they come with cheap and better services from day one and is able to deliver at a rate the other two cannot. Than, it might have a fix, if not it might be a risky investment and sold quickly to either of these. Peace.

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