Surging activity and investment have benefitted the Philippines’ telecommunications industry in the decades following its deregulation, with mobile penetration increasing rapidly among a large population of digitally literate consumers. Although the market remains dominated by two operators, rising competition between them saw capital expenditure soar in 2016, driving improvements to service quality and consumer tariffs. Recent government moves to re-allocate new spectrum have further supported expansion of 3G, 4G and LTE services.

Eventful Year

Marked by several major regulatory reforms aimed at improving sector development, market competition and service quality, 2016 was an important year for the industry. The first reform was the establishment of a new department overseeing nearly all ICT activities in the country (see analysis), approved by outgoing former president Benigno Aquino III in May 2016. The second came later in the year, when a legal battle kicked off between the country’s telecoms duopoly – the PLDT, formerly the Philippine Long Distance Telephone Company, and Globe Telecom – and the Philippine Competition Commission over the former’s move to acquire new spectrum left unused following the collapse of a planned joint venture between San Miguel Corporation (SMC) and Australia’s Telstra, which would have seen the entrance of a third major operator. The industry regulator is now moving to auction the spectrum to an outside player, excluding the duopoly from bidding, which will have major ramifications for the existing market.

At A Glance

The Philippines telecommunications industry has expanded rapidly since its liberalisation in the 1980s, when consumers waited up to 10 years for a landline connection and service quality was generally poor. Although the market was controlled for nearly 65 years by a private monopoly, deregulation initiatives launched in 1987 led to the opening of the market to new competition. This has eroded dominant operator PLDT’s market share, particularly during the past decade, as consumer preferences have increasingly shifted towards mobile broadband and digital services, disrupting traditional voice and SMS streams.

Today the Philippines has one of the fastest-growing telecommunications markets in Asia, supported by the rapidly expanding use of data services by an increasingly tech-savvy population. According to the latest figures from the National Telecommunications Commission (NTC), the total number of mobile users in the country rose from 6.45m in 2000 to 130.32m at the end of 2014, and GSMA Intelligence reported in December 2014 that the number of unique mobile subscribers grew by 6% between 2012 and 2014. Half the population uses to mobile services, according to the company’s “Country Overview Philippines: Growth Through Innovation” report, and in October 2016 professional services firm EY reported that mobile penetration in the Philippines stood at 111%.

Digital Engagement

GSMA Intelligence reports that the Philippine market is unique in the sense that its young, literate and largely English-speaking 103m-strong population is particularly engaged. The country has been called the texting and social media capital of the world, and the vast majority of new internet users are coming online via mobile phones.

The Philippines is also one of the fastest-growing smartphone markets in South-east Asia, according to a June 2016 report published by the International Data Corporation (IDC). The IDC’s Asia/Pacific Quarterly Mobile Phone Tracker found that 3.5m smartphones were shipped to the Philippines during the first quarter of 2016, a 20% year-on-year (y-o-y) increase, with the market offering significant future growth potential due to relatively low smartphone penetration, which stood at 30% as of 2015, the IDC’s latest figures.

“Penetration of technology in the Philippines is among the lowest in South-east Asia,” Manuel Wong, managing director of Acer Philippines, told OBG. “Currently, just close to half of Filipinos have their own handheld devices. However, this figure is expected to rise with the entry of more competitively priced gadgets and data plans,” he added.

Ericsson, meanwhile, forecast that smartphone penetration will rise to 70% by 2018, with penetration expected to exceed the country’s urban population, driven by expansion of 4G LTE and LTE-A services.

According to Ericsson’s “South-east Asia and Oceania Regional Mobility” report, published in December 2015, LTE subscribers will account for 40% of total mobile subscriptions in the Philippines by 2018, while over 75% of the population in South-east Asia and Oceania will be able to access LTE networks by 2021.


The sector simultaneously struggles with diverse, disparate and challenging geography and has lagged behind its neighbours in communications infrastructure development in large part due to underinvestment until the 1990s. The territory is spread across more than 7000 islands, making fixed networks difficult to establish, while permits for new infrastructure are issued at the local level (see IT overview).

Prices are high, largely due to the fact that the market is controlled by an effective duopoly. Although competition between the two has been intensifying in recent years, the entrance of a third major operator has so far failed to materialise.

Human resources represents yet another challenge. Although the national labour force displays a large amount of talent for ICT, it may not be enough to sustain the rapid growth of the sector. BPO companies are often the first to snatch up recent university graduates who have earned analytics and computer science degrees. Some suggestions to remedy this include additional research and development spending, more support for ICT-related start-ups and for academia to focus on courses with the highest growth potential.

Oversight & Operators

Established in 1979, the NTC is the country’s telecoms regulator. Its core functions include issuing licences and permits for telecommunications services, telecoms law enforcement, radio frequency spectrum allocation and undertaking studies on industry requirements.

The Department of Information and Communications Technology (DICT), meanwhile, oversees the broader ICT industry, after former president Benigno Aquino III split the functions of the Department of Transportation and Communications to create a standalone ICT department in May 2016 (see analysis.) According to the NTC’s most recent annual report, published in October 2015, five major telecommunications operators accounted for 95.62% of total lines in the country as of the end of 2014, with independent, local exchange providers accounting for the remaining 4.38%, or 260,111 installed lines. The mix has since changed considerably, however, with the exit of one player – Vega Telecom, which held a controlling interest in five smaller operators – and the entrance of five new operators in late 2016. The country’s mix of mobile operators is dominated by the powerful duopoly of PLDT and its mobile subsidiaries, Smart Communications and Sun Cellular, and Globe Telecom, which has a fixed-line subsidiary, Innove.


PLDT is the largest and most dominant operator in the market, holding a 49.87% market share of installed lines as of December 2014, according to the NTC, and accounting for 41.49% of the mobile subscribers. Incorporated in 1928, the operator has maintained a dominant market position for the past 90 years. Its first cellular network launched in 1987, and its first communications satellite in 1997 through its subsidiary, Mabuhay Philippines Satellite Corporation. The country’s first internet hub, Philippine Internet Exchange, was also established under PLDT in 1997.

The 1998 Asian financial crisis marked a turning point for the company. In November that year, Hong Kong’s First Pacific acquired a 17.5% stake in PLDT, valued at P29.7bn ($628.3m), or $749m at the time.

The following year, PLDT acquired Smart Communications, the Philippines’ largest mobile phone operator, which now runs as its mobile arm. PLDT also acquired a 51.55% stake in Digitel, owner of the popular Sun Cellular brand, in October 2011, making it the largest mobile operator by subscribers.

PLDT, Smart Communications and Sun Cellular had a combined 64.45m mobile users at the end of the first quarter of 2016, a 7% decline from 69.62m users in the first quarter of 2015. Fixed broadband users stood at 5.29m, a 17% increase over the same period the previous year, while there were 2.34m fixed telephone connections, representing 5% growth y-o-y.

Globe Telecom

PLDT’s biggest competitor is Globe Telecom, the country’s second-largest operator, with a 26.6% market share of installed lines and a 15.36% share of subscriber lines at the end of 2014. Originally established in 1935 with a franchise to operate wireless long-distance message services, Globe is focused on providing digital wireless communication services, while its subsidiary, Innove, manages its fixed-line services. The company’s principle shareholders are local conglomerate Ayala Corporation, with a 13.22% stake, Singapore’s Singtel, with a 20.13% share, and Asiacom, which holds 50.92%. An additional 15.73% of the company is traded publicly.

Globe Telecom has undertaken a number of major acquisitions in recent years, including the July 2015 acquisition of Bayan Telecommunications Holdings, in which it increased its equity interest from 56.87% to 98.57%, and the acquisition of 50% of Vega Telecom in May 2016, as well as a 50% equity of New Century Telecoms and eTelco in the same month. Vega owned controlling interests in Bell Telecommunications Philippines, Eastern Telecommunications Philippines, Cobaltpoint Telecommunication (formerly Extelcom), Tori Spectrum Telecommunication (formerly Wi-Tribe), and Hi-Frequency Telecommunication.

These acquisitions have supported robust mobile subscriber growth. Mobile customers rose by 20% in 2015 to 52.9m users from 44m in 2014, and hit 57.3m in the first quarter of 2016, an 18% increase y-o-y.

Recent Growth

Although both dominant operators have recorded a robust financial performance in recent years, ongoing network modernisation to accommodate expansion of 4G LTE services is affecting profitability, particularly at PLDT.

In 2015 the company’s core net income fell by 6% to P35.2bn ($744.7m), from P37.4bn ($791.2m) in 2014, resulting from a manpower reduction programme and higher financing costs. PLDT recorded its first quarterly net loss in over a decade during the fourth quarter of 2015, with losses reaching P3.3bn ($69.8m), from P6.1bn ($129m) in net income in the same period of 2014. Net income including exceptional transactions decreased by 35% to P22.1bn ($467.5m) in 2015, from P34.1bn ($721.4m) a year previously.

In May 2016 PLDT announced that net income declined 34% y-o-y in the first quarter of 2016, with local voice call revenues, traditionally a strong point, falling by 6% y-o-y, and national long-distance call revenues down by 16% y-o-y. Total revenues rose by 1% y-o-y to P42.8bn ($905.4m), although annual pretax income dropped by 27% to P9bn ($190.4m), core income fell by 22% to P7.2bn ($152.3m), and earnings before interest, tax, depreciation and amortisation (EBITDA) was down by 14% to P16.6bn ($351.1m). The company lost roughly 5m prepaid wireless subscribers in 2015, mostly to Globe Telecom.

According to the company’s unaudited financial results, core net income totalled P27.9bn ($590.2m) in 2016, a fall of 21% y-o-y, after the company recorded a quarterly core net loss of P3.3bn ($69.8m) in the fourth quarter of 2015. PLDT’s core income was down mainly due to lower EBITDA and higher capital expenditures related to ongoing expansion of the fixed and mobile networks. Net income stood at P20.16bn ($427.3), compared to P22.08 ($467.1m) in 2015.

Globe Results

Unlike PLDT, Globe Telecom has had a better recent financial performance, reporting record turnover, EBITDA and net income in 2015, while consolidated service revenues rose by 15% to hit P113.7bn ($2.4bn). In the fourth quarter of 2015 sales peaked to a record P30.3bn ($641m), a 3% quarter-on-quarter increase, supported by strong subscriber growth, particularly for data services across all business lines. Consolidated service revenues increased by 12% in 2015 to P110.8bn ($2.3bn), and mobile revenues rose by 9% to P85.1bn ($1.8bn). The company’s mobile data revenues jumped by 55% that year to hit P22.1bn ($467.5m).

Its positive performance continued in 2016, with the company reporting that consolidated service revenues rose 14% y-o-y to P29.9bn ($632.5m) in the first quarter, driven by gains in data-related segments, and supported by subscriber growth in both the mobile and fixed broadband lines. Total mobile revenues rose by 7% y-o-y to hit P23.1bn ($488.7m), while mobile data service revenues surged by 62% y-o-y to P9.1bn ($192.5m), offsetting 11% and 15% declines in voice and SMS revenues, respectively. Mobile data comprised 40% of the company’s revenues in the first quarter of 2016, up from 26% in the same period of 2015.

Driven by data products, the company earned a record net income of P16bn ($338.5m) in 2016, a 6% increase over the year. At close to P120bn ($2.5bn), net consolidated service revenue broke another record, outpacing the previous peak of P113.7bn ($2.4bn) achieved in 2015. Mobile data now contributes 38% to total mobile revenues, compared to 37% for voice.

New Entrants

In November 2016 five new local players began operating in the telecommunications market, after Congress approved their applications in June 2016. New providers include Avocado Broadband Telecoms, Ama Telecommunications, Infinivan, Metro Connections and Telecom, and Megamanila Telecom. All five were awarded licences, or franchises, to construct, install, establish, operate and maintain telecommunications systems in the Philippines.

Avocado Broadband was established by a group of Luzon-based cable operators which have combined their capacity to expand services into rural areas, according to senator Paolo Benigno Aquino IV, with former senator Ramon Magsaysay acting as chairman of the new company’s board. Infinivan, meanwhile, is engaged in constructing, installing, establishing, acquiring, leasing and operating wired and wireless networks, stations and services. Limited information is available on the remaining three firms.

Service Improvements

Outside of these smaller companies, efforts to launch a third major mobile operator have so far been unsuccessful. A new entrant could still be forthcoming in the mid-term, however, following President Rodrigo Duterte’s October 2016 announcement that he plans to bring in a third major telecoms player, possibly from China, if Globe Telecom and PLDT do not improve their service quality. The country currently has the slowest and poorest-quality internet in South-east Asia, according to a February 2016 Forbes report (see IT overview), including mobile broadband, although recent moves to free up new spectrum on the 700-MHz frequency should see significant near-term improvements.

Auction Potential

In October 2016 the NTC announced it intends to auction 3G and 4G mobile frequencies in 2017, with the aim of attracting a third major telecoms player. The auction would be the first of its kind in the NTC’s history, and would likely receive some form of backing from the World Bank, according to media reports. The auction, which required DICT approval to move forward, would likely sell frequencies returned to the government after two recent industry deals, one of which fell apart in mid-2016.

Gamaliel Cordoba, NTC’s commissioner, told media the commission will sell 10 MHz of 3G spectrum previously held by Connectivity Unlimited Resources Enterprise (CURE), which had been relinquished by PLDT after it acquired Digital Telecommunications Philippines, CURE’s parent company, in 2011. Additionally, 20 MHz of the highly coveted 700-MHz spectrum should also be up for grabs, although the ownership of this spectrum is being disputed by both PLDT and Globe. Indeed, while the auction is expected to be limited to new players, it is contingent on resolution of the legal dispute between the competition commission, Globe and PLDT over the telecoms assets of SMC, which were jointly acquired by PLDT and Globe in May 2016.

Spectrum Battle

In 2014 SMC, a major beer and food conglomerate, launched a bold plan to build and operate a third national mobile network in the Philippines through its subsidiary, Vega Telecom. The firm later reported it was in talks with Australian telco giant Telstra, with the intent of forming a joint venture.

Telstra said it was considering a $1.5bn investment equivalent to a 40% stake, with plans to deploy a high-speed mobile data network which would serve considerable untapped demand. In September 2015 the company told the Australian Securities Exchange that it was seeking financing for the venture, though talks between the two companies collapsed in March 2016. Media reports attributed this to the high costs required to launch a new network, with construction estimates reaching as high as $2.5bn over four years.

Although Ramon Ang, president of SMC, told media that the company would continue to pursue a solo deal, in May 2016 SMC announced it had abandoned this plan, after PLDT’s shareholder, Hong Kong-based First Pacific, and Globe Telecom issued statements confirming that each company planned to buy a 50% stake in Vega Telecom. In the same month SMC agreed to sell its telecoms assets to PLDT and Globe Telecom at a price of P69.1bn ($192.5m).

Following these developments, the NTC announced it would give Globe and PLDT’s Smart Communications permission to co-use certain frequencies in the 700-MHz spectrum which had previously been held by SMC, as well as rights to other bands held by Vega.

New Allocation

Smart Communications was allocated space on frequencies 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, according to the NTC. Globe, for its part, is now licensed to operate on the following frequencies: 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 commission also announced it would assign frequencies which had previous belonged to Bell Telecommunications Philippines, a Vega subsidiary, to Globe and Smart Communications provided the companies immediately implement a co-use agreement, provide higher broadband and internet access speeds within one year, establish a plan to deliver broadband connectivity to 90% of Philippine cities and municipalities within three years, pay spectrum user fees, secure the necessary permits and licences, and grant NTC access to base stations and cell sites for monitoring purposes.


The deal met with stiff resistance from consumer groups and the Philippine Competition Commission (PCC). Although the commission originally approved the deal, and announced in June that under current telecoms legislation the buyout did not constitute an abuse of dominant market position, President Duterte described the country’s mobile market as a cartel in the same month, a sentiment echoed by Franklin Drilon, president of the Senate.

The PCC began a review of the documents filed in relation to the join buyout, and in July 2016 both Globe and PLDT launched separate filings to the Court of Appeals to stop the review from moving forward, arguing it had already received approval. In August 2016 the Court of Appeals halted PCC’s antitrust review, but in September the PCC announced that it considers the joint buyout anti-competitive and likely to further strengthen PLDT and Globe’s existing duopoly.

According to the commission, the limited availability of new spectrum outside of frequencies allocated to Globe and PLDT in May has effectively barred any third party from actively competing in the market. The NTC also lent its support to a spectrum auction which would exclude Globe and PLDT.

Appealing For Competition

The situation was further complicated on October 6, when the PCC called on the Court of Appeals to completely nullify the SMC buyout, arguing that the takeover and associated land acquisition is in contravention of the Philippine Competition Act, which was enacted under the Aquino administration in 2015. The PCC criticised both Globe and PLDT for supplying only sparse details of the proposed transaction, thus failing to disclose many of the key terms of the deal to the public. In November 2016 the NTC announced that it planned to move forward with a spectrum auction, which would exclude PLDT and Globe from bidding, although the final outcome will depend on both the resolution of the legal dispute between the PCC, PLDT and Globe, as well as DICT approval. Nonetheless, the announcement bodes well for the near-term entrance of a third player. The resulting competition could see the big two operators’ market share erode in the coming years, prompting both to invest in new network deployment in a bid to improve service offerings, as mandated by the NTC and President Duterte (see IT overview).


Although the collapse SMC and Telstra’s joint venture has dampened the prospect of a near-term third market entrant, the prospect of an industry shake-up does remain strong given prevailing political mandates. Rising competition in the sector may dampen the growth outlook for PLDT and Globe; however, both consumer and macroeconomic expansion are set to benefit from rising capital expenditure in new telecoms infrastructure that would accompany the entrance of a new player, particularly in the arena of mobile and national broadband services.

Demographic shifts are also a factor, with young people driving many emerging trends. “The growth of e-commerce will accelerate as younger generations enter the workforce and generate higher income levels and purchasing power,” Enrique Y Gonzalez, CEO of IP Ventures Group, told OBG. “The adoption and operation of internet-based platforms will be critical for retail players in the Philippines,” he added.