Mobile sector pushes net profit up for Filipino telcos

3 Aug 2004

The Philippines’ dominant telco Philippine Long Distance Telephone Company (PLDT) has reported a net profit of PHP12 billion (USD215 million) for the first half of 2004, a rise of 573% from PHP1.8 billion reported in the same period of 2003. Revenues grew by 20% to PHP55.6 billion. The operator attributed the exceptional result to strong subscriber growth at its mobile subsidiaries Smart Communications and Philippine Telephone Company (Piltel), which reported net profits of PHP11.6 billion and PHP809.5 million respectively. The two cellcos had a combined customer base of 16 million at the end of June, 12.45 million of which were Smart customers and the remainder Piltel subscribers.

Revenues from PLDT’s fixed line operations have dwindled in recent years. Although the market has witnessed a great deal of activity and investment since liberalisation in 1993, the country suffers from a high degree of overcapacity; at the end of 2003 there were 6.56 million fixed lines installed, but just half – 3.31 million – of these were actually in service. Teledensity is painfully low, hovering at around 4% for the past few years. Despite the market being wide open to competition and the reasonable growth opportunities, operators have been unwilling to invest in the less lucrative rural areas and have turned to other sectors of the market to boost revenues.

Unlike the wireline market, the country’s mobile sector has seen significant growth over the last few years, with the total number of subscribers standing at 24.3 million at the end of March 2004, a penetration rate of 29.9%, up from 16.5 million and 20.8% the same date in 2003. The sector was boosted with the launch of the country’s sixth GSM operator Sun Cellular, owned by fixed line operator Digitel, in April 2003, and the market could be faced with further competition in the near future; according to local press sources, the regulator has received an application from Connectivity Unlimited Resource Enterprise (Cure) to rollout 3G services. Fixed line operator Bayantel is also reported to be looking to expand into the mobile market.

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