Ushering In A New Era For PH Telecommunications

The telecommunications industry in the Philippines is undergoing a significant shift, as recent reforms and the entry of a third major player are poised to break the long-standing duopoly dominated by PLDT and Globe over the past two decades.

Photo Insert: Analysts predict that despite an expected loss of mobile subscribers in 2023 due to the SIM registration process, the overall telecoms market will continue to thrive until 2030.

According to a recent report titled "Philippines Telecoms Industry Report - 2023-2030" by Research and Markets, the arrival of DITO Telecommunity and Converge ICT has sparked a wave of investments in telecommunications infrastructure. This surge in investments is fueling competition and paving the way for greater innovation in the sector.

The report offers an in-depth analysis of the Philippines' telecoms industry, covering market sizing, revenue and market forecasts, key trends, digital infrastructure, and opportunities related to 5G, Mergers & Acquisitions (M&A), and e-commerce.

It also profiles major telecom operators, provides insights into mobile and broadband subscribers, spectrum holdings, IoT market, and offers a detailed overview and forecasts of the national broadband network and telecom tower market.

The report highlights that the telecoms industry is experiencing robust growth due to expanded coverage, improved affordability, service enhancements, increased data usage, and smartphone penetration.

Furthermore, it notes that the country's fiber-optic network and 4G coverage are expanding, thanks to substantial capital expenditure investments. In fact, the telecoms sector witnessed its highest level of investment in 2021, primarily due to the launch of new entrant DITO Telecommunity.

Analysts predict that despite an expected loss of mobile subscribers in 2023 due to the SIM registration process, the overall telecoms market will continue to thrive until 2030. This growth is driven by the projected increase in mobile subscriptions and strong growth in fixed broadband penetration, especially between 2023 and 2030.

The CapEx to GDP ratio, which remained relatively stable between 2014 and 2018, saw a remarkable surge in 2019. While it is expected to peak in 2021, the ratio is projected to settle back by 2024.

Both PLDT and Globe have been heavily investing in 4G and 5G technologies, with PLDT focusing on network expansion and Globe shifting its attention to its fixed broadband business after a period of stagnation in 2021.

Meanwhile, DITO Telecommunity is ramping up its mobile network investments, indicating an above-average CapEx-to-sales ratio until 2023.

While the report forecasts a decline in mobile subscribers in 2023, the fixed broadband segment is expected to experience robust growth. From 2024 onwards, it is anticipated that both mobile and broadband subscribers will steadily increase until 2030.

Mobile network operators face mounting competitive pressure, leading to a shift towards unlimited voice, text, and data offerings as the primary differentiator.

A benchmark study of mobile data pricing in the Asia Pacific region revealed that the Philippines lags behind in terms of data download rates. However, with the acceleration of 4G coverage and increasing smartphone penetration, particularly in regional areas, the country is expected to catch up.

Historically, the Philippines has lagged behind other ASEAN countries in terms of fixed broadband infrastructure, particularly in the fiber-to-home (FTTH) segment.

PLDT's FTTH penetration falls significantly short of countries like Indonesia, Malaysia, and Thailand. While Globe initially focused on fixed wireless access, it has now shifted its strategy back to FTTH. However, both PLDT and Converge ICT remain ahead of Globe in this aspect.

Other players, such as Radius Telecom, have made small-scale efforts, targeting wealthy gated communities in Metro Manila and other major cities. Among the significant contenders, Converge ICT has emerged as a strong player, demonstrating impressive growth after PLDT.

The entry of a third telco player and the push for tower sharing by the Department of Information and Communications Technology (DICT) have sparked a flurry of infrastructure investments.

To accommodate this growth, over 50,000 new towers will be built and shared across the industry. While existing tower assets are unlikely to be shared immediately by Globe and Smart unless mandated by regulators, numerous new Tower Companies (TowerCos) are being established, each planning to construct thousands of towers over the next three years.

The country currently has one of the lowest ratios of mobile towers per capita in the ASEAN region, necessitating this infrastructure development.

The increased investments in telecommunications infrastructure have attracted interest from investment funds, resulting in high valuation multiples for assets like mobile towers, data centers, submarine cables, and fiber infrastructure.

While most telecom operators are currently heavily investing in upgrading their 4G network infrastructure, a wave of consolidation among TowerCos is expected to take place after 2024-2025, as profit margins continue to be squeezed. The next capital expenditure cycle is projected to begin with the advent of 6G technology in 2030.

With the imminent deployment of 5G technology, the Philippines stands on the precipice of a transformation in mobile networks. The potential benefits and business models beyond faster connectivity, such as augmented reality, virtual reality, and autonomous vehicles, remain largely unknown.

The increasing smartphone penetration, driven by the availability of affordable devices, will continue to fuel the growth of e-commerce, tapping into the potential of the emerging middle class in the Philippines with higher disposable incomes.

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