Philippines Telecoms Industry Report - 2020-2025

Samples

Executive Summary

Philippines Telecoms Industry Analysis Report at a Glance

The Philippines’s telecommunications industry has been dominated by the PLDT-Globe duopoly over the last two decades. Telecommunications infrastructure investments have been underwhelming while recent reforms and the launch of a third mobile operator will bring competition and innovation in the sector.

The author forecasts that mobile subscriptions will continue to grow strongly in the 2020-25 period and fixed broadband subscribers will also continue to grow and increase its household penetration over the same period. The ratio of the telecommunications sector revenue to GDP is declining from a peak in 2005, sliding down every year since then.

Expanded coverage, greater affordability, service improvements, increased data usage and smartphone penetration are the main drivers of growth in the telecoms sector. The country continues to expand its fibre-optic network and 4G coverage, backed by strong investment in capital expenditure. Investment in the telecoms sector is growing to its highest in 2020 with a peak expected in 2021 with new mobile market entrant DITO Telecommunity due to launch that year.

Mobile subscribers numbers are growing strongly and the back of population growth, increasing affordability and new regulation lengthening the prepaid load expiry dates to 12 months.

The publisher expects the overall telecoms market to grow strongly through to 2025 after a marked slow down in 2016 and 2017 due to legacy voice and SMS revenue pressure partially offset by mobile data growth.

Capex Investments

The Capex to GDP ratio remained relatively stable between 2014 and 2018 but soared in 2019. The author estimates that the ratio will settle back by 2023 peaking in 2020. Both PLDT and Globe are investing heavily in 4G with PLDT playing catch-up by investing in its 4G network expansion while Globe launched its 5G fixed wireless service. The report forecasts an above-average Capex to sales ratio until 2022 while DITO Telecommunity ramps up its mobile network investments.

Mobile Subscribers and Revenue

Forecasts show strong growth in subscribers in 2019 and 2020 while the rebasing of mobile subscribers reporting is taking place with the NTC requirement that all the prepaid load expiry be set to 12 months. We expect that the number of mobile phone subscribers will continue to rise steadily to 2025.

Mobile network operators are facing competitive pressure with the market shifting to unlimited voice and text and data allowance increasingly becoming the sole offering differentiator.

The publisher benchmarked mobile data pricing across 8 countries in the Asia Pacific region and found that the Philippines is lagging behind in terms of data download but we expect the country to catch up as 4G coverage is accelerating and smartphone penetration is increasing especially in regional areas.

According to our benchmark study of mobile data pricing, India has the lowest rate per GB at just a few cents per GB, while Australia and China had the biggest cost reduction per GB mostly due to increased data allowance in plans while Singapore remains expensive. The Philippines pricing is on par with Thailand when benchmarked against neighbouring countries.

Broadband Subscribers - FTTH Push and Fixed Wireless

The Philippines fixed broadband is very much a laggard compared to other ASEAN countries which have invested more heavily in Fibre-to-home infrastructure. PLDT’s FTTH penetration is much lower than in other countries such as Indonesia, Malaysia or Thailand. Globe’s efforts have turned to fixed wireless access which is not likely to fulfil customer’s appetite for video long-term. Other efforts from ABS-CBN with Sky Broadband and Converge ICT remain small in scope and so far targeting only wealthy gated communities areas of Metro Manila, other large cities or new developments.

Thematics - Telecoms Infrastructure / 5G / M&A / e-Commerce

The Philippines is a sleeper market for mobile infrastructure, this is largely due to the cosy monopoly enjoyed between Globe Telecom and Smart (PLDT) over the last two decades and also due to the massive red tape required for building a mobile tower. The announcement of the third telco player ignited the market for tower sharing together with the DICT pushing a policy to build over 50,000 new towers shared across the industry, attracting a new category of infrastructure investors that were not participating in the market until now. New tower-build accompanied by fiberisation of the latter will boost the country’s telecoms infrastructure and will most welcome in the market after two decades of under-investments in the Philippines market.

Mobile operators and specialised towercos are rushing to sign deals but we doubt Globe and Smart will share any existing assets in a hurry unless they are forced to by the regulator.

The Philippines has one of the lowest ratios of mobile towers per capita and highest numbers subscribers per base transceiver stations (BTS) in the Association of South-East Asian Nations (ASEAN) region.

Investment funds are assigning high valuation multiples to telecommunications infrastructure assets such as mobile towers, data centres, submarine cable and fibre infrastructure. This report outlines some real market examples of how investors view and value these investments with industry examples and EV/EBITDA comparatives and benchmarks.

Most telecommunications operators are in heavy investments phase both in fixed and mobile segments, spending heavily upgrading their 4G network infrastructure. The author expects a wave of consolidation in the Philippines but not before 2022-2023, as margins get squeezed further and a new Capex cycle kicking with 5G.

The arrival of 4G moved the Internet off our desktops into our palms and pockets, 5G could transform the network from something we carry around to something taking us around either virtually (augmented reality or virtual reality) or in reality (autonomous vehicles), the 5G outcome and benefits beyond fast connectivity remain largely unknown in terms of business models, investments required and timeline.

The increase in smartphone penetration made possible by the availability of low-cost devices has triggered growth in e-commerce, tapping into the potential of the Philippines’s emerging middle class with relatively high disposable income. Grab, Lazada, Shopee and Zalora are leading the pack with e-commerce, ride-sharing and mobile payments.

Companies Mentioned

• ABS-CBN
• Aboitiz InfraCapital Inc
• ALT Global Solutions Inc.
• American Tower
• Bayantel
• Chelsea Logistics and Infrastructure Holdings Corp.
• Converge ICT
• DITO
• edotco
• Frontier Tower Associates
• Globe
• Islacom
• LCS Holdings Inc.
• Lopez Group
• Mislatel
• Mynt
• Now Corp
• Piltel
• PLDT
• PT&T
• Royal Cable
• Udenna
• Sky Cable
• Sky Broadband
• Sun Cellular
• Vega
• Voyager

Methodology

The publisher uses primary and secondary research as well as proprietary information sources to generate market analysis and forecasts for fixed and mobile services in terms of both subscribers and revenue. Interviews are conducted with key service providers in the region to determine current and potential market sizing as well as future service offerings. Information gathered through interviews is further cross-checked to validate the total market size.

The primary research is supplemented with a range of secondary source material, including related research, press releases, securities filings, media, Web-based materials, and trade publications.

Industry and population statistics are also leveraged for reference and to ensure consistency in the data collection. Extensive service provider primary and secondary research, together with the publisher's end-user research database, provides a strong basis for sizing and forecasting the market. The multiple reference points allow for validation of information provided by the service providers compared with that gathered from alternative sources.

Note: Forecasts are made in local currency, and no allowance is made for inflation. All numbers in this document may not be exact due to rounding.