2010 Philippines - Telecoms, Mobile, Broadband and Forecasts

As mobile growth slows in Philippines, a big surge in broadband Internet is taking place

After years of solid growth, the mobile segment of the telecom market in the Philippines slowed dramatically in 2009, reflecting a general downturn in the economy. Whilst growth in mobile subscribers slowed, so also had mobile revenues with just a 1% rise on the previous year, this compared to revenue growth of almost 6% in 2008. Into 2010 the Philippines mobile market had 75 million mobile subscribers (81% penetration) and looked likely to continue modest growth (10%-15%) through to the end of the year.

The country’s GDP growth had eased to under 5% in 2008, down from the 31-year high of 7.3% in 2007 as the recession in the US, its main trading partner, started to hit exports and as rising inflation curtailed consumer spending. Growth in the Philippines slipped even further in 2009 coming in at just 0.1%. At the same time, the country’s telecom industry also shifted to a pattern of more modest growth, with the core mobile services business looking more like it was approaching maturity. By 2010, however, there was increasing optimism that the economy’s down time was passing, with the IMF forecasting growth in GDP of around 4% for the year.

The major operators had been forced to cope with the pressures of slowing growth in traditional areas of the market and rising investment needs for new growth areas such as consumer broadband. Mobile expansion had certainly slowed by 2010, but the operators were continuing to talk positively about the market’s potential. With modest growth the clear pattern into 2010, the mobile market remained central to the development of the Philippines telecom sector, just as it has done over the last decade or so. Although the sector was facing challenges there was clearly some energy remaining in it as the two leading operators continued to roll out their Third Generation mobile offerings.

In the meantime there is a growing interest in broadband services, with the major players in the local telecom market starting to invest heavily in the expansion of broadband access and looking at both wired and wireless broadband platforms to provide coverage. The demand for broadband services was starting to rapidly increase coming into 2010, underpinned by the rising availability of PCs in the country. (There were an estimated 12 million units by 2009 representing a PC penetration of 13%). Despite the fresh new round of growth, overall broadband penetration remains relatively low; there were only three broadband services for every 100 people in the country early in 2010.

The country’s fixed-line subscriber penetration, which has been well and truly living in the shadow of the mobile juggernaut, remained essentially stagnant. It has certainly been a long period of difficult times for the fixed-line operators. Despite the concerted effort of both the government and the operators to expand the national fixed network, fixed-line teledensity stood at less than 5% in 2010 and only a little more than half of all Philippine towns and cities had a basic telephone service.

The Philippine telecom and IT market continues to reflect considerable optimism despite the vicissitudes of the local market and the questions hanging over the global economy; significantly, the sector has been contributing more than 10% to the country’s GDP, having obviously been given a massive boost by the mobile segment over the last decade.

Market highlights:

• Growth in mobile subscribers slowed dramatically in the Philippines in 2009 but despite the poor national economy still managed to grow 9% in the year;
• Reinforcing the depressed state of the industry in 2009, mobile revenues grew just 1%, this compared to revenue growth of almost 6% in the previous year;
• There was evidence of a modest recovery in the mobile market in 2010 with overall subscriber growth set to reach 10%-15% by year end taking penetration close to 100%;
• Filipinos had sent an estimated 1.8 billion SMS messages every day in 2009;
• However, the volume of text messages looked likely to peak at this 2009 level, as social networking websites started undermining some of the traffic patterns;
• Broadband Internet access in the Philippines was finally growing in a significant fashion, with the country having experienced a four year growth surge in that market segment;
• There were an estimated 2.5 million broadband subscribers by end-2009, but this still only represented 3% of the population;
• While PLDT continued to be the country’s leading broadband operator, the leading WiMAX operator was Globe Telecom. Just 12 months after launch it had a subscriber base of over 700,000 coming into 2010;
• Growth in the fixed-line market remained sluggish; fixed teledensity stood at less than 5% with the numbers only likely to edge up slightly in the short term;
• The Philippine telecom sector continued to be an important element in the local economy, contributing over 10% to the country’s GDP.

Philippines: - key telecom parameters – 2009 - 2010

(Source: BuddeComm)

¹Estimates for both 2009 and 2010.

Peter Evans
November 2010

Data in this report is the latest available at the time of preparation and may not be for the current year.