Dr. Epictetus Patalinghug, together with three other respected UP professors, revealed from their research that it will be difficult for the Philippines to give way for new players in the telecom sector unless the government will back it up.
Crucifying the current Globe versus PLDT rivalry will be both unfair and illogical, according to Patalinghug from his recent speech at the Asian Institute of Management.
Given the existing law that forbids major foreign ownership of a company and the massive capital requirements to bridge the gap that the two existing telcos have already built over the last few decades, PH market is indeed not feasible enough to allow foreign telecom investors to invest in the country.
“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 undeveloped areas whose deployment cost is higher than the almost saturated urban markets dominated by the incumbents,” said Patalinghug.
“The question is do we need a new player? Looking at Digitel when they were around, they were not making a lot of money. Our analysis is that a third player can enter the market if it is cost insensitive for the next ten to fifteen years. No private firm can afford that,” he added.
The Philippines is not alone when it comes to a two-player telecom structure with Myanmar as the other while India, the second most thickly-settled country in the world, will also join the list in the coming months, according to Patalinghug.
“Look at the market in India, if you look at the last report, India will move from a four player industry, they are merging into a two-player tele-commerce,” said Patalinghug. “The only thing is when we have two (players), there is fierce price competition.”
He also revealed that during the mid-90’s the Philippines had eleven telco players.
“In 1992 to 1996, we got 11 telco players in this industry. But deregulation has always been followed by consolidation. So Smart was bought by PLDT, Islacom was bought by Globe, Bayantel was bought by Globe, Sun was bought by PLDT, so from deregulation you have some consolidation,” stressed Patalinghug.
“And that pattern exists all around the world, India started with six, India in the next few years will only have two,” he said.
He believes that the only workable solution for the country to have a new rival is for the government to establish its own telecommunications company.
“The only realistic third player is the government, but its social value is its cost-insensitive capacity to pour investments in “last-mile” and high costs areas, and to build “last-mile” network that complements with existing networks,” he said.
But still Patalinghug has his own apprehensions: “However, there are historical examples of government failures in direct provision and operation of utility services.”
Concurrently, the government will begin to build cell sites in different parts of the country, particularly in remote areas, thru the newly established Department Information and Communications Technology (DICT).
This is mainly to help address the lack of cell sites in the country and not yet signal the birth of a state-owned telecom company, DICT undersecretary Eliseo Rio, Jr. stressed.
“The government will build and then lease these cell sites to small players or to those interested telcos. Our government (will not yet operate these structures), taking from the experience of Telepono sa Barangay, it was not a success, so maintenance and usage of these cell sites will be better off with the private companies,” said Rio.
“The government’s approach is technology neutral, so everything that we can build should give cost effective transmission of communication facilities,” added Rio.