Yearender: 2008 a difficult year for telecoms sector

The year 2008 provided a great challenge for the country’s telecommunications and information technology sector.

It was a difficult balancing act – trying to satisfy the ever-changing needs and wants of the public and offering products and services that they can afford, as if the challenges posed by the high oil price regime, depressed economy worldwide, weakening consumer purchasing power, and intense competition weren’t challenging enough.

With demand for mobile phones and mobile phone services slackening, telecommunications companies had to find innovative ways and means to cope. This they tried to achieve by lowering their rates even more, and looking for other new businesses – hoping to find another killer service that could revolutionize telecommunications in the country, in the same way text messaging or SMS did.

Philippine Long Distance Telephone Co. (PLDT) was not spared from the economic debacle. In fact, it suffered a two-percent drop in its consolidated net income to P26.2 billion during the first nine months of the year from P26.4 billion in the same period last year largely due to foreign exchange revaluation.

But the group’s core net income was still strong at P27.8 billion during the January-September 2008 period, a five-percent growth from the P26.4 billion recorded in the same period last year.

“When we announced our first half results last August, we anticipated stronger head winds in the second half with inflation accelerating and taking it toll on consumer wallets and on cash expenses. At that point, while the beginnings of the financial turmoil were slowly being felt, we were shocked, just as the rest of the world was, at the severity, scope and depth of the financial crisis and the speed by which it enveloped not only capital markets but also sovereigns such as Iceland,” Pangilinan said.

He, however, expressed confidence that they will still attain their P37 billion projected core net income for 2008, which is five percent more than 2007.

Pangilinan however admitted that 2009 will likely be a tougher year than 2008 and is expected to be a period of severe financial deleveraging, tighter credit, selective investment flow, and severe inflation.

“We are seeing continued growth of corporate data. The trend in broadband shows that it is impervious to consumer spend. The challenge is how to cope with lower consumer spending. This means we have to spend our capital expenditure judiciously,” he said.

Arch rival Globe Telecom was similarly not spared. It posted a nine percent drop in its consolidated net income for the first nine months of 2008 to P8.8 billion from P9.7 billion in the same period last year driven mainly by lower operating earnings but partially offset by lower financing costs.

Globe president and CEO Gerardo Ablaza says that while OFW remittances are still growing, there is a weakness in both consumer and business confidence, requiring a more prudent strategy for next year.

But not everything about the telecommunications sector is bad news. While the double digit growth rates for the mobile sector will remain a thing of the past, there are new technologies, like broadband and wireless landline, that are fast rising as the next battleground for telecommunications companies.

PLDT in fact reported that its total broadband subscriber base is now at 880,000, 51 percent higher than the figure as of end 2007. Company officials expect the number to hit one million by the first quarter of 2009 at the latest.

Globe , meanwhile, announced that it is significantly growing its broadband subscriber base, which has reached 175,000 as of end-September this year, compared with 116,000 in the same period last year, a 51 percent increase.

Of the 175,000 subscriber base, 154,000 is accounted for by fixed wired and wireless broadband while 21,000 is from fully mobile broadband service.

Aside from broadband, wireless landline has emerged as another exciting area for the local telco sector.

Tunde Fafunwa, chief executive consultant of Bayan Telecommunications describes 2008 as the year the Filipino voice was heard more.

He says the wireless landline, with its unlimited talk time for a fixed rate within and outside of the network, became a preferred communication device for people who want to talk more and be freed from the high cost of metered rates. Rightfully so, he emphasizes, as the Philippines still has the highest voice call rates for mobile phones in Asia.

Fafunwa noted that the wireless landline was a game-changing service as even the leading mobile operators are lowering their rates for voice calls and a new player has emerged catered to offering low metered charges for voice calls.

In the past year, wireless landline subscription grew by more than 100 percent compared to the double digit range of cellular services. With texting as a well developed and mature service, now is the time for voice to take its place as a real service, and not as a value add, he adds.

Fafunwa also pointed out that Internet connection via broadband also grew at a very fast pace in 2008, as rates became more affordable due to intense competition in the market. “Adoption of internet connection is expected to grow in a variety of forms. Whether via DSL or wireless broadband, households now have a variety of options to choose from to meet their internet connection. Ultimately, it is the Filipino consumer and the country who wins as the Internet becomes a pervasive tool for information and knowledge formation,” he said.

Meanwhile, in the corporate data services market, the small and medium enterprise (SME) market and business process outsourcing (BPO) sector continue to be the main focus areas of growth, as other industries continue to shift from the traditional connectivity requirements to more affordable yet reliable technologies.

Fafunwa says that overall, with the emergence of the voice service, 2008 can be best remembered as providing Filipinos a glimpse of the seismic shifts in the telecommunications industry. “And we believe it is just the tip of the iceberg. There are disruptive changes that becoming more evident as technology evolves further,” he pointed out.

“In 2009, I believe the focus should be not just on technology but what makes the customers lives better. As the economy contracts and consumer spending declines, the provider who engages and connects to the customer more would have a significant edge. Parallel to this, government should continue to encourage intense yet fair competition in the market to ensure the customers get the best value for their service,” he said.

“Technology continues to evolve and for the greater mass of consumers, it should be useful, available when he needs it, and meets his service expectations. Consumers are making use of existing and useful technologies such as Wi-Fi, VoIP, among others despite the evolution of higher technologies and the industry should continue to respond what consumers want. The goal of Bayan is to deliver simple, useful, and honest services, as our main mission is to let the Filipino voice be heard. We will continue to listen to our customers and to find ways to deliver disruptive and differentiating services. Also, we will pursue synergies with our sister company, ABS-CBN, to delve into content that will engage and interact with our customers,” Fafunwa stressed.

Meanwhile, technology leader IBM list down five innovations that have the potential to change the way people work, live and play over the next five years.

The Next Five in Five is based on market and societal trends expected to transform people’s lives, as well as emerging technologies from IBM’s Labs around the world that can make these innovations possible.

“Our researchers and consultants have come up with five innovations that are going to change the way we live in the next five years. We call it the Next 5 in 5. These technologies are in different stages of development right now, and the work done in IBM labs all over the world contribute to making these trends into reality,” says IBMP Philippines chief technologist Lope Doromal.

In the next five years, technology innovations will change our lives in the following ways:

1) Energy saving solar technology will be built into asphalt, paint and windows

Ever wonder how much energy could be created by having solar technology embedded in our sidewalks, driveways, siding, paint, rooftops, and windows? In the next five years, solar energy will be an affordable option for you and your neighbors. Until now, the materials and the process of producing solar cells to convert into solar energy have been too costly for widespread adoption. But now this is changing with the creation of “thin-film” solar cells, a new type of cost-efficient solar cell that can be 100 times thinner than silicon-wafer cells and produced at a lower cost. These new thin-film solar cells can be “printed” and arranged on a flexible backing, suitable for not only the tops, but also the sides of buildings, tinted windows, cell phones, notebook computers, cars, and even clothing.

2)You will have a crystal ball for your health

What if you could foresee your health destiny and use that knowledge to modify your lifestyle? Even though we are told that things like French fries, potato chips, cheese and wine aren’t good for us, what if you could find out specifically that you are someone who could consume more of those vices without having negative impact on your health? In the next five years, your doctor will be able to provide you with a genetic map that tells you what health risks you are likely to face in your lifetime and the specific things you can do to prevent them, based on your specific DNA - all for less than $200. Ever since scientists discovered how to map the entire human genome, it has opened new doors in helping to unlock the secrets our genes hold to predicting health traits and conditions we may be predisposed to. Doctors can use this information to recommend lifestyle changes and treatments. Pharmaceutical companies will also be able to engineer new, more effective medications that are targeted for each of us as individual patients. Genetic mapping will radically transform healthcare over the next five years and allow you to take better care of yourself.

3) You will talk to the Web . . . and the Web will talk back

“Going” to the web will change dramatically in the next five years. In the future, you will be able to surf the Internet, hands-free, by using your voice - therefore eliminating the need for visuals or keypads. New technology will change how people create, build and interact with information and e-commerce websites - using speech instead of text. We know this can happen because the technology is available, but we also know it can happen because it must. In places like India, where the spoken word is more prominent than the written word in education, government and culture, “talking” to the Web is leapfrogging all other interfaces, and the mobile phone is outpacing the PC. In the future, through the use of “VoiceSites,” people without access to a personal computer and Internet, or who are unable to read or write, will be able to take advantage of all the benefits and conveniences the Web has to offer. And by the web becoming more accessible by using voice, it will become easier to use for everyone. Imagine being within a phone call’s reach from the ability to post, scan and respond to e-mails and instant messages - without typing. You will be able to sort through the Web verbally to find what you are looking for and have the information read back to you - as if you are having a conversation with the Web.

4) You will have your own digital shopping assistants

Ever find yourself in a fitting room with all the wrong sizes and no salesperson in sight? And what about affirmation from friends that the outfit you’ve chosen truly does look good on you? In the next five years, shoppers will increasingly rely on themselves - and the opinions of each other - to make purchasing decisions rather than wait for help from in-store sales associates. A combination of new technology and the next wave of mobile devices will give the in-store shopping experience a significant boost. Fitting rooms soon will be outfitted with digital shopping assistants - touch screen and voice activated kiosks that will allow you to choose clothing items and accessories to complement, or replace, what you already selected. Once you make your selections, a sales associate is notified and will gather the items and bring them directly to you. You’ll also be able to snap photos of yourself in different combinations and email or SMS them to your friends and family for the thumbs up...or the thumbs down. Shoppers can access product ratings and reviews from fellow consumers and will even be able to download money-saving coupons and instantly apply them to their purchases.

5) Forgetting will become a distant memory

Information overload keeping you up at night? Forget about it. In the next five years, it will become much easier to remember what to buy at the grocery store, which errands need to be run, who you spoke with at a conference, where and when you agreed to meet a friend, or what product you saw advertised at the airport. That’s because such details of everyday life will be recorded, stored, analyzed, and provided at the appropriate time and place by both portable and stationary smart appliances. To help make this possible, microphones and video cameras will record conversations and activities. The information collected will be automatically stored and analyzed on a personal computer. People can then be prompted to “remember” what discussions they had, for example, with their daughter or doctor by telephone. Based on such conversations, smart phones equipped with global-positioning technology might also remind them to pick up groceries or prescriptions if they pass a particular store at a particular time. It’s not hard to imagine that TVs, remote controls, or even coffee table tops, can one day be the familiar mediums through which we tap into our digitally-stored information.