Efforts to expand the Philippine ICT network accelerate


While the Philippines has a robust economy with sound macroeconomic fundamentals, its telecoms sector still lags behind global standards, in large part due to a lack of competition and limited investment. In spite of this, the domestic telecoms market is ripe for change and set to welcome a major new player, following the president’s promise to accelerate network modernisation. Consequently, rising capital expenditure in communications infrastructure, as well as spectrum reallocation, is set to revolutionise the digital landscape.

Under the national Build, Build, Build agenda, the incumbent administration wants to transform the Philippines into an upper-middle income nation by 2022. To achieve this target, limitations on foreign ownership within the telecoms industry will be lifted to attract investment. As a result, the country’s ICT sector is gearing up for a dynamic shift in capacity.


In terms of regulation, the Department of Information and Communications Technology (DICT) focuses on the development of the ICT industry as a whole, while the National Telecommunications Commission (NTC) is in charge of enforcing laws, allocating spectrum, and issuing licences and permits across the telecoms industry. Formed in mid-2016, the DICT is the sole regulator of the ICT sector after the Department of Transportation and Communications was split into two offices. The market regulator assumes the roles of five former government departments; namely, the Information and Communications Technology Office, the National Computer Centre, National Computer Institute, Telecommunications Office and the National Telecommunications Training Institute.


The Philippines is one of the fastest-growing telecoms markets in Asia, with mobile subscriptions on an upward trajectory from 34.8m in 2005 to 117.8m in 2015, before dropping to 113m in 2017, according to data from UN agency International Telecommunication Union. Comparatively, fixed phone subscriptions fluctuated over the same period, rising from 3.4m to reach a high of 4.1m in 2009 before settling at 3.8m in 2016. In terms of mobile penetration rate, figures dipped from 124% in 2016 to 118% in 2017, or from 34 times the fixed-line penetration to 29 times.


Since the establishment of the DICT, headline news from the sector has centred around the potential entrance of a new mobile operator, a prominent issue during Rodrigo Duterte’s presidential campaign. While a new operator is set to transform the market (see analysis), as of May 2018 the sector was still dominated by a powerful duopoly made up of Globe Telecom and PLDT, formerly the Philippine Long Distance Telephone, which owns subsidiaries Smart Communications and Sun Cellular. PLDT is financed by Hong Kong-based First Pacific, which holds about a 25% stake in the firm – the remaining shares are distributed among several other companies – while Globe Telecom is financed by a joint venture between local conglomerate Ayala Corporation and Singapore’s According to PLDT’s annual 2017 report, as of December 31, 2017, Smart Communications and Sun Cellular (referred to as Digitel Mobile Philippines in the report) had a total of 58.3m mobile users – 96% of which were prepaid – and a market share of 49%. This represented a decline on the previous year, which recorded 62.8m subscribers and a 50% market share. In terms of broadband services, the number of subscriptions rose from 1.72m in 2016 to 1.95m in 2017, as did the number of fixed-line subscribers, which increased from 2.4m to 2.7m over the same period.

Smart Communications was the long-standing frontrunner until the end of 2016, when it was outpaced by Globe Telecom, which saw mobile subscriptions increase by 12% in 2015 to reach 62.8m. The growth was largely driven by a 13% rise in prepaid subscribers, Though still the largest mobile operator in the country, by the end of 2017 Globe Telecom’s mobile subscriber base dropped to 60.7m. This 3% dip can be attributed to a change in the company’s reporting methods at the beginning of 2017, when Globe Telecom excluded from their data collection prepaid subscribers who did not reload within 90 days of the second expiry period, compared to the previous cut-off of 120 days.


While major plans are in place to overhaul the country’s broadband capabilities (see IT overview), the data services offered by the two operators are well below global standards. However, steady progress in 4G availability has been made since early 2017 and the trend is set to continue throughout 2018. According to a study released in October 2017 by OpenSignal, a crowdsourcing analytics firm, the Philippines ranked 69th out of 76 countries surveyed for 4G availability. While still near the bottom, this was an improvement on the 72nd place it achieved in July that year.

OpenSignal’s “State of Mobile Networks: Philippines” study for March 2018 showed that not much had changed since the last report six months before, describing the current situation as “a two-horse race with customers having a choice between more 4G availability on the one hand, and faster LTE speeds on the other”. Compared to the six other South-east Asian countries surveyed, the Philippines’ 4G availability of 63.7% is only higher than that of Myanmar at 62.5%. All other South-east Asian nations surveyed had 4G availability of 70% and above.

After conducting 777.8m measurements over 51,000 devices in the country from November 2017 until January 2018, the March 2018 report found that Globe Telecom’s average 4G availability – defined as the proportion of time users can connect to a network – was 67.5%, while Smart Communications averaged 60%. Though both are still below the 70% indicative of a maturing LTE coverage, the two operators had improved their network availability since the March 2017 report, when Globe Telecom’s 4G availability was at 55.3% and Smart Communications’ was at 40%.

In a further comparison, customers of Globe Telecom benefitted from greater availability, while Smart Communications’ customers experienced considerably faster download speeds. During the study period, Smart Communications’ 4G download speed averaged 12.5 Mbps, up from the 10.6 Mbps reported in the October 2017 study. Meanwhile, Globe Telecom average 4G download speed stood at 7.7 Mbps, slightly up on its October 2017 result of 7.2 Mbps. Smart Communications’ LTE download speed performed better than Globe Telecom’s across all regions included in the study, which were Mindanao, the National Capital Region, North Central Luzon, South Luzon and Visayas. Comparing network responsiveness speeds, Smart Communications was again the top provider, recording a latency average of 47.2 milliseconds against Globe Telecom’s 60.7 milliseconds. In average 3G download speeds, this was 2.5 Mbps for both operators.


Amid growing demand for data availability and the latest technologies, such as LTE networks, telecoms companies have been encouraged to focus on expansion efforts; however, this has led to a significant impact on their overall yearly earnings. According to its 2017 financial statement, PLDT’s reported net income dropped by 33% from PH20.0bn ($395.1m) in 2016 to stand at PH13.4bn ($264.7m). The reason for this substantial drop in earnings was mainly due to the company’s 44% year-on-year upswing in spending during the fourth quarter of 2017, as a result of changing equipment vendors and upgrades to some of its wireless network base stations. Similar downward trends were also seen in the company’s revenues from FY 2016 to FY 2017, which slipped by 3% from PH147.6bn ($2.9bn) to PH143.5bn ($2.8bn), and its core income, which fell by 1% from PH27.9bn ($551.2m) to PH27.7bn ($547.2m).

Despite lower overall revenue, combined revenue from data, broadband and digital platforms grew by 11% to PH67.0bn ($1.3bn), to comprise a 47% contribution to total earnings for the year. PLDT’s earnings before interest, tax, depreciation and amortisation (EBITDA), however, stood at PH67.8bn ($1.4bn) in FY 2017, a rise of 11% on PH61.2bn ($1.2bn) in FY 2016.

Driven by sustained growth in mobile data and an expansion in its broadband customer base, Globe Telecom registered PH127.9bn ($2.5bn) in total service revenues in 2017, an increase of 6% on the previous year. Similar to PLDT, data-related services were the main drivers of Globe Telecom’s performance in 2017, accounting for a 54% share of service revenues. Additionally, revenues from mobile services rose by 7% from PH92.3bn ($1.8bn) to PH98.5bn ($1.9bn). Over the same period both Globe Prepaid and TM, the company’s mass-market brands, posted revenue growth of 11% and 8%, respectively. Despite these financial gains, however, Globe Telecom’s net income for 2017 stood at PH15.1bn ($298m), representing a 5% reduction from 2016 as a result of higher operating costs and increased investment in data networks.


In an effort to advance communication networks, Globe Telecom has committed to a capital expenditure of $850m for 2018, matching the previous year’s budget, with the target of providing ultra-highspeed internet services to 2m homes by 2020. While improving residential broadband capabilities is a key part of its future goals, Globe Telecom also plans to deploy Massive MIMO (multiple-output, multiple-input) technology in 2018 in a bid to enhance its LTE network. As of February 2018 the provider had rolled out almost 1700 LTE sites on the 700 MHz frequency, in addition to some 2000 sites on the 1800 MHz and 2600 MHz bands, and in the following month it announced it had partnered with Chinese telecoms company Huawei to start testing the world’s first frequency-division-duplex-based Massive MIMO commercial product.

Since 2007 PLDT has invested around PH300bn ($5.9bn) in network infrastructure through its subsidiaries, and for 2018-20 it set aside a capital expenditure budget of about PH180bn ($3.6bn), or PH60bn ($1.2bn) per year. As such, Smart Communications is on track to meet its commitment of making LTE available to 95% of cities and municipalities by the end of 2018, having upgraded more than 4200 mobile sites in 2017. To improve indoor coverage, the PLDT subsidiary focused on rejigging its existing sites to use low-frequency bands, such as 700 MHz and 850 MHz. Meanwhile, in an effort to increase call handling and data capacity, the firm increased the usage of high-frequency bands 1800 MHz and 2100 MHz. By December 2017 Smart Communications’ 3G and 4G broadband networks had a municipality coverage of 89%, more than double the amount of LTE-capable sites available in 2016.

A year after introducing 4G LTE services in Cebu City in 2016, Smart Communications rolled out wireless coverage to the rest of the province, including the tourist hotspots of Daanbantayan, Moalboal, Oslob and Toledo. By the close of 2017 there were around 1.4m Smart Communications subscribers and 1.8m Sun Cellular users in Cebu; however, 70-80% were still using 2G or 3G networks.

Infostructure Project

The network is also set to benefit from the Philippine Integrated Infostructure (PhII) project, which forms part of the National Broadband Plan (NBP). Under the PhII project, the government aims to assist rural areas, particularly in underserved regions, by providing internet access points at affordable costs with the goal of establishing connections of at least 10 Mbps by 2020 (see IT overview). It will oversee the creation of a demand-responsive core and aggregation network, which is intended to leverage from existing government assets and initiatives, such as GovNet, iGovPhil and Pipol Konek – or the Free Wi-Fi Internet Access in Public Places project – and support areas identified as growth centres, including national government agencies, local government units, public elementary and secondary schools, state colleges and universities, and public hospitals and rural health units, among others. The PH77.9bn ($1.5bn) project will link international submarine cable connections to domestic nodes, resulting in individual access networks known as Super Wi-Fi, as well as bolstering local fibre-optic networks and LTE capacity.

Fibre Optics

Measures are also being taken to diversify networks by strengthening the national fibre backbone. According to local media, PLDT is set to spend PH11bn ($217m) by the end of 2019 on a network modernisation plan that will roll out 1m new fibre ports across the country. Meanwhile, about 1.3m existing xDSL subscribers will be upgraded to fibre. By the fourth quarter of 2017 approximately 4m homes had subscribed to PLDT’s fibre-to-the-home (FTTH) service, up from 2.8m users a year earlier.

The fibre network will complement PLDT’s deployment of hybrid copper/fibre technologies, known as G.fast, which rolled out at the end of 2017. As a result of this combination, customers that previously received peak service of 15 Mbps via ADSL2+ were expected to access speeds of up to 100 Mbps, and eventually 1 Gbps once the FTTH expansion is complete.

In addition to the FTTH initiative, PLDT completed expansion works on the domestic fibre-optic network (DFON) in Mindanao in October 2017. At an estimated cost of PH1bn ($20m), the company installed 300 km of fibre infrastructure across Agusan del Norte, Agusan del Sur, Davao del Norte and Davao del Sur, boosting local loop capacity from 100 Gbps to 400 Gbps. As of March 2017 PLDT’s fibre infrastructure, inclusive of the DFON, consisted of 176,000 km of fibre-optic cabling.


After a planned joint venture between San Miguel Corporation (SMC) subsidiary Vega Telecom and Australia’s Telstra collapsed in March 2016, PLDT and Globe Telecom moved in to buy a 50% stake each in Vega Telecom, for a combined cost of PH69.1bn ($1.4bn). The bold move to acquire the mobile assets of SMC was quickly followed by the state’s decision to redeploy spectrum from available users and reallocate it to others. Following the purchase, the NTC announced it would allow the duopoly to co-use certain frequencies in the 700 MHz spectrum, previously owned by SMC, as well as other bands formerly held by Vega Telecom. At the end of 2017 Smart Communications was operating across eight frequency bands, including: 720.5-738 MHz, 775.5-793 MHz, 885-890 MHz, 930-935 MHz, 1717.5-1725 MHz, 1812.5-1820 MHz, 2365-2380 MHz and 2629-2669 MHz. Globe Telecom was also operating across eight bands, including: 703-720.5 MHz, 758-775.5 MHz, 880-885 MHz, 925-930 MHz, 1710-1717.5 MHz, 1805-1812.5 MHz, 2380-2395 MHz and 2555-2595 MHz.

The deal was initially approved by the Philippine Competition Commission (PCC), but in mid-2016 the commission began a review of the buyout. Shortly after the review was announced, both Globe Telecom and Smart Communications filed complaints to the Court of Appeals in an effort to halt the review, on the grounds that both companies had already received approval for the buyout. Following the separate filings, the Court of Appeals ordered the PCC to stop its investigation. However, in September 2016 the NTC backed the PCC’s new position that PLDT and Globe’s existing duopoly and buyout of SMC hindered any third party from actively competing in the market. In the following month the PCC requested the Court of Appeals to nullify the buyout based on the fact that the takeover was an infringement of the existing Competition Act, and by November of that year the NTC announced that it would be auctioning off spectrum to a new player, excluding PLDT and Globe Telecom from bidding.

A new wave of spectrum re-farming commenced in March 2018, which saw PLDT divest 10 MHz of the 3G radio frequency that was previously assigned to its now defunct subsidiary Connectivity Unlimited Resources Enterprise, acquired by Smart Communications in 2007. According to DICT officials, the band will be auctioned off to the new player, which will have no obligation to reimburse PLDT. The decision by PLDT to abandon the frequency at no cost came after President Duterte said tax auditors would be sent to telecoms companies that insist on selling their frequencies to the government.

A number of other players expanded network reach in 2017, including Broadband Everywhere (BE), a wireless broadband provider and Philippine subsidiary of Norway-based Ice Group, which secured a 20 MHz block of spectrum on the 3.5 GHz band and 5 MHz on the 450 MHz band in December. Following the successful acquisition of spectrum from the NTC, BE claimed exclusive industry rights to operate 15 MHz on the 450 MHz-frequency band.


According to a report released in April 2018 by International Data Corporation (IDC), the import of smartphones dropped by 7% to 15m devices in 2017, marking the product category’s firstever decline since entering the market. Due to intense market competition from big brands such as Samsung, OPPO and Vivo, many smaller vendors had to adjust their supply intake as a result of lower sales, which ultimately affected national smartphone shipment figures. The report also noted that Filipinos have begun shifting to devices with better features and specifications, whereas historically customers were more price-oriented. However, ultra low-end smartphones – those that cost less than $100 – continue to make up the bulk of the market, with a 59% share of all smartphone devices in 2017, compared to 67% in 2016.

Despite the decline in shipment numbers, the broader smartphone market in the Philippines is expected to bounce back in 2018 as competition between major brands continues to grow and more people consider higher-end smartphones (see Telecoms analysis). According to GSMA Intelligence’s “The Mobile Economy Asia-Pacific 2017” report, the smartphone adoption rate was expected to increase from 59% in 2016 to 71% by 2020.


Given current market dynamics, much of the future success of the telecoms market will depend on the entrance of a major new player and the careful allocation of available spectrum. Until then, the existing duopoly will prioritise network expansion in preparation of the new entrant, which is set to trigger significant price cuts. Network infrastructure initiatives will continue to drive investment in the short to medium term, and customers will benefit from better coverage and lower prices as a result of sector expansion.

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The Report: The Philippines 2018

ICT chapter from The Report: The Philippines 2018

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