Philippine Chamber of Telecommunications Operators Welcomes Study that Could Improve State of Communications in Philippines

The Philippine Chamber of Telecommunications Operators (PCTO) has welcomed a new research study on the state of the Philippine telecommunications industry that could help the government further improve mobile services in the country.

The study, “Assessment of the Structure, Conduct, and Performance of the Philippine Telecommunications Industry” by University of the Philippines Prof. Emeritus Dr. Epictetus Patalinghug, described the local telco market as highly concentrated and highlighted the barriers to the entry of a third player in the industry.

PCTO chairperson Eric de los Reyes said it is the only paper that has presented the real situation of the industry.

“The study anchored on economic principles and covered all aspects of the industry which can help our legislators, regulators and policymakers in improving the state of Philippine telecommunications,” de los Reyes said in a statement.

According to Patalinghug, among the barriers to the entry of a new player in the telco industry are the need for a congressional franchise, spectrum availability, huge capital requirements, and the various licenses and permits from different government sectors.

De los Reyes reiterated that these entry barriers may be the reasons why no new major telecom company has invested in the country in the past 15 years, although there are those who tried but did not stay long.

“From the business perspective, putting up a huge amount of money late in the game may not be viable, considering that there is no immediate profitability due to the huge capital expenditure needed to build up the infrastructure and the high cost to maintain the operation annually in order to be competitive against incumbent players,” he said.

Furthermore, the cost of acquiring new subscribers as a late entrant traditionally is more expensive.

Patanglihug said during a forum at the Asian Institute of Management that 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 underdeveloped areas where deployment cost is higher than the almost saturated urban markets.

“The massive capital requirements to bridge the gap that the two existing telcos have already built over the last few decades make the market not viable for the entry of a new player,” he said.

“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.”

The PCTO was organized and incorporated as a non-stock, non-profit organization in 2003 with 14 founding members to foster closer relations and cooperation among the telecommunications companies and other stakeholders.

It also aims to help the government formulate and carry out policies, rules and regulations of the telecommunications sector. The 14 PCTO founding members are Globe Telecom Inc., Smart Communications Co. Inc. (Smart), Philippine Long Distance Telephone Co. (PLDT), Bayan Telecommunications Inc. (Bayantel), Capitol Wireless Inc. (Capwire), Digital Telecommunications Philippines Inc. (Digitel), Eastern Telecommunications Philippines Inc. (ETPI), Express Telecommunication Co. Inc. (Express Telecom), Isla Communications Co. Inc. (Islacom), Philippine Association of Private Telephone Companies (Paptelco), Philippine Global Communications Inc. (Philcom), Philippine Telegraph & Telephone Co. (PT&T), Pilipino Telephone Corp. (Piltel), and Telecommunications Technologies Philippines Inc. (TTPI). (PR)