Cellphone firms downscale SIM-swap scheme

The country’s two leading wireless companies have scaled down their SIM card-swapping activities, a move expected to reduce costs for both Smart Communications and Globe Telecom.

At the same time, the action would weed out SIMs and subscribers that do not generate revenues in the first place and instead merely bloat the subscriber numbers.

Smart Communications, which accounts for 58 percent of the cellular market, has scaled down its SIM card-swapping activities, a scheme which it initiated to entice its competitors’ subscribers to switch networks but which later turned out a nightmare for the company.

PLDT group chairman Manuel V. Pangilinan likewise encouraged its competitors to stop their respective SIM swapping, an activity which he describes as generating more cost than revenues.

"All our SIM-swap activities will wind down. We hope that our competitors will follow. They’ve seen our scaling back," he said, referring to Globe Telecom and Digitel’s Sun Cellular.

But Globe president and CEO Gerardo Ablaza told The STAR that they have already unilaterally scaled back their SIM-swap activities late last year.

"If you will recall, for nine months in 2003, we hesitated to engage in SIM swaps because we believe that it is a damaging kind of marketing program. It produces rotational churn and results in wastage," he said in an interview. Globe, however, reacted to Smart’s SIM-swapping activities and came out with its own to avoid a "one-way churn," he said.

Ablaza emphasized that with the possibility this year of industry revenues being under pressure, "it is a good move for all operators to wind down their SIM-swapping."

Meanwhile, Pangilinan admitted that the huge gap between the growth in subscriber numbers and that of revenues has become an issue for the group. While industry subscriber base grew 44 percent during the first quarter of 2005, industry revenues increased only seven to eight percent. Smart’s revenues grew 11 percent while that of Globe, by four to five percent.

Smart and Piltel reported a combined net income of P6.95 billion during the first quarter of 2005. Before foreign exchange gains and derivative transactions, the amount is P5.93 billion. Service revenues stood at P17.4 billion in the January-March 2005 period which PLDT president and CEO Napoleon Nazareno expects to hold steady in the second quarter.

"The gap is largely due to the SIM-swapping activities (Smart subscribers swapping their SIM cards for Globe and vice-versa) and partly due to the fact that the industry is now penetrating the lower-income D and E market which uses the mobile phone more for texting than for making voice calls. We have to accept the fact of lower ARPUs (average revenue per user) as we penetrate the mass market. However, we hope to close the gap in the next few weeks as we wind down our SIM-swapping activities," he said.

The churn rate (the rate of subscribers that left for other networks) for Smart-Piltel for the first quarter is 3.2 percent combined.

While there are Globe or Sun Cellular subscribers that have opted to swap their SIM cards for those of Smart, Pangilinan noted that not all those who migrated are topping up (or loading credits). This, he said, results in "fluffiness" in cellular numbers.

With the winding down of SIM-swapping activities, he expects a temporary decline in industry take-up. "We must now address this revenue-generating challenge and come up with new areas of revenue growth," he added.