Fitch warns of fierce competition in PH telco sector
Fitch Ratings Inc. expects competition in the Philippine telecommunications industry to further heat up with the entry of a new major player which may act as a price disruptor.
The London-based credit ratings agency said the consortium of China Telecom and Davao-based businessman Dennis Uy’s Udenna Corp. “is initially likely to compete aggressively on price as it strives to grab market share in an already highly saturated mobile market.”
“We expect a large cash burn for the new entrant to roll out its network, and consequently, only a newcomer with deep pockets and technical expertise would be able to compete effectively against the incumbents,” Fitch said.
Fitch said the entry of a new competitor would be challenging for Globe and PLDT in light of high capex. The two industry giants have ramped up their capital spending to accelerate the rollout of their long term evolution network and fiber infrastructure in race to win more subscribers.
The presence of a new telco player could temper PLDT and Globe’s revenue growth.
Uy’s Mislatel consortium bagged the third telco license after two rival bidders were rejected and foreign firms — Norway’s Telenor, South Korea’s KT Corp and Vietnam’s Viettel backed out.
Opening the telco industry to other players was.one of President Duterte’s priorities to shake up the PlDT-Globe duppoly and improve the country’s patchy internet connectivity.
“The severity of the threat from a new entrant is unclear at this stage, though government intervention may be needed to accelerate industry reforms to raise competition,” Fitch said.
This includes re-evaluation of the current 40 percent foreign-ownership cap for public utilities, infrastructure and tower sharing, as well as spectrum redistribution, Fitch said.
“The ability to monetize higher data traffic remains a key challenge in the Philippines, which is also facing secular declines in revenue from legacy services such as SMS, international and mobile voice,” it added.
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