Telco battleground

Globe Telecom’s strong 2007 results underscore the fact that the telecommunications sector remains to be one of the strongest and most profitable businesses in the country today. The Philippine Long Distance Telephone Co. (PLDT) will be announcing its financial and operational results this coming week and a survey of analysts expect an equally strong performance for the year 2007 driven by the cellular and the broadband business. Knowing PLDT chairman Manny Pangilinan, our bet in the newsroom is that he will exceed market expectation.

This brings me to where the battleground for telcos this coming year should be. Since they are already making an obscene amount of money, it’s about time these companies pour those billions back to improve their quality of service. While they impress their shareholders with huge dividends and profits, the quality of service of some of these telcos still leaves much to be desired.

PLDT has started to focus on this aspect of the game. Their announced reorganization last December was designed principally to address and improve its quality of service. However, in the last two weeks, major outages were experienced in Metro Manila and last weekend, thousands of us in the Quezon City area were left without service for days.

The resurging Bayantel of the Lopezes has built its growth on where the other telcos are deficient – quality of service.  They promise a quick turnaround time for repair and installation, and even give subscribers P500 a day if they fail to repair their service within 24 hours. I wonder when PLDT and Globe will follow suit. It’s no wonder that Bayantel has grown by over 170,000 subscribers in a few months with their Bayan Wireless.

Broadband will also be a hot battleground for growth this year. The PLDT Group’s Mydsl and Smartbro have pulled away from the pack by ending the year with over 500,000 subscribers. Globe is a far second with about 160,000 subscribers. If you believe the corporate magazine of PLDT, they have a story where the Retail Business Group headed by Butch Jimenez was able to hit a record high of 7,500 connections a week last December.  At that pace, PLDT Mydsl alone should add at least 400,000 subscribers by yearend 2008.  Globe Broadband needs to pick up the pace if they plan to win the broadband battle.

Globe Broadband however has been the more aggressive telco in providing lower cost and higher speeds to the market.  Last year, they launched the bundled broadband and landline package for only P900. That price point was well received by subscribers and broke the market wide open. Globe would have grown much faster but PLDT’s Jimenez quickly launched a counter attack mitigating Globe Broadband’s advantage. I’m expecting Globe Broadband to keep the pressure on and push the envelope further. They should learn from the way Smart walloped them in the cellular business. If they don’t move now and move aggressively, they will experience the same fate twice and find themselves way behind in the broadband game.

Analysts have said two years ago the telco business will be flat and boring. That’s far from the truth. The telco business remains exciting and dynamic. And now with the entry of Bayantel into the mix with their wireless landline, the competition will be more intense. Gabby Lopez has stumbled upon a goldmine. And knowing Gabby, he’s going to use this to bring his telco to the top.

But to all the telcos earning billions of pesos, let’s hope they put some money back in customer service. Since their subscribers have given you world-class profits, they owe it to the same subscribers to give them world-class service. 

Reaction

“First of all, please accept my warmest regards to you, with every wish that you continually find joy and fulfillment in your journalistic work, especially when you take up causes for the public good. It is for this reason that I write you today in response to your column item on the possible reduction of toll fees in the light of the appreciating value of the peso or, more aptly, the depreciation of the dollar.

“I share your thinking that the reduction in toll fees will greatly assist and offer immediate relief to bus operators and, may I add, other users of the North Luzon Expressway (NLEX). How I wish that we can immediately make toll rate adjustment every time the dollar drops or the peso rises, or vice versa.

“However, as you know, we have an existing Supplemental Toll Agreement with the government, which mandates that we can make toll rate adjustment after every two years. And precisely because of the improved peso, we were able to bring down toll rates by 11 percent last Jan. 1, 2007. The next regularly scheduled toll rate adjustment is on Jan. 1, 2009, a mere nine months away.

“Anyway, I have good news for you and our NLEX users. The Manila North Tollways Corp. could still be able to pass on the benefits of a stronger peso in the form of lower toll fees earlier than January 2009 – once our pending request with the Toll Regulatory Board is approved for a change in the toll rate adjustment formula. Actually, we have been in discussions with the TRB about that possibility with our recommended twin moves: One: Remove the dollar factor from the toll rate formula; and two: Convert our $80 million debt to a peso loan so that we can realize the full benefit of a strong peso under a favorable exchange rate regime. We can then, pass on such benefit to our customers in the form of lower toll fees.

“Let me explain that if we use the present toll formula, MNTC cannot immediately realize the full benefit of a strong peso or a weak dollar. The only time we can realize this benefit is when we pay our dollar loan obligations which we do every six months. What’s more the benefits from a loan repayment installment of $6 million every six months is not so big an amount as to make a significant difference in lowered toll fees.

“In short, once the TRB approves our request, we can immediately move on to retire all our dollar loans with peso-denominated debt notes. And so, once the refinancing is completed, we will waste no time in passing on such a benefit to our NLEX users.”

“Finally, may I thank you for sharing with us our preferential concern for our customers. I am glad that we have this option available to us, so we can respond positively to the aspiration for lower toll fees.

“Let me emphasize, though, that the NLEX is not only about toll fees lower than any other tollways in the country. The NLEX is about MNTC’s commitment to continually improve our tollway structure and systems. NLEX is all about assuring that our NLEX users will continue experiencing safe, fast and comfortable travel through our 84- km world class expressway.” –JOSE P. DE JESUS, president and CEO, MNTC

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