Tuesday, March 21, 2017
the Structure, Conduct, and Performance of the Philippine Telecommunications Industry, explained that ate of change of average internet connection speed in the Philippines is increasing, and this gap will soon be bridged by new investments in network facilities.
Akamai’s Q3 2016 report on the other hand showed further improvement as the Philippines’ average mobile internet speed of 13.9 mbps for the July to September period was the fastest in the Asia Pacific region.
to continually maintain and upgrade the network infrastructure. Philippine telecoms firms’ investments in major infrastructure programs are expected to continue even beyond 2020.
deploying additional frequencies, building-up their fixed-line segment, and undertaking a major network expansion to improve the coverage and quality of its voice, SMS, and mobile internet, particularly its LTE service.
deployments of LTE services using the 700 megahertz (MHz) and 2600 MHz frequencies, increased 3G capacities, further expansion of mobile coverage, and deployment of fiber broadband technology for homes.
While local telecoms firms’ capital expenditures have been increasing significantly, this has had an adverse effect on their profitability and cash-flow margins through the years. Both PLDT and Globe have in fact been earning below the average rate of returns when compared to those of top Philippine firms in other industries.
A look at Return on Assets (ROA) per industry from 1997 to 2014 shows that a department store like SM had an ROA of 14.42 percent, and a beer company such as Asia Brewery reached 12.13 percent, while PLDT and Globe recorded ROAs of only 9.18 percent and 6.70 percent, respectively.
The market and competitive analysis of the industry by the research paper points to fierce competition between Globe and PLDT, particularly in terms of price competition and the race to install and upgrade facilities. The market realities of capital intensity, sunk costs, and economies of network size therefore result in lower profitability in the long run. These serve as barriers to entry for new players especially in less populated “last-mile” areas whose infrastructure deployment cost is far higher compared to dense urban areas./PN