Potpot Pinili, a Philippine travel blogger, is paying less to access the Internet on the go—almost half as much as three years ago, thanks to a price war.
“Data has become definitely cheaper,” said Pinili, 41. “You can do more online quicker and at less cost.”
Pinili and other Philippine customers are benefiting, as the nation’s two largest phone companies fight for smartphone subscribers in a market that, according to International Data Corp. (IDC), had 30-percent penetration as of 2015. PLDT Inc. and Globe Telecom Inc. are luring prospective consumers with data packages that are among Asia’s cheapest,
saying they need to spend money now to counter a decline in revenue from calls and text messages.
The outlays are eating into profits and hurting share performance. PLDT, whose 2016 profit is forecast to be the lowest since 2003, was the worst performer on the Philippine Stock Exchange index last year. Globe was the fourth-worst, and recorded a drop in income for the first time in three years.
“The Philippines is a two-player market, yet they are killing each other,” said Karen Hizon, a Manila-based analyst at UBS Group AG. One megabyte of data brings in just 0.1 US cent of revenue in the Philippines, compared with 1.13 US cents in China, according to UBS.
Last month Globe matched a PLDT offer and started offering a three-day, 1-gigabyte plan that includes a bonus 300 megabytes to use on apps from Facebook Inc. and Spotify Ltd. for P50 ($1).
“This is the cheapest price for mobile data so far,” said Yolanda Crisanto, a spokesman for Taguig City-based Globe. A year ago, P50 was only paid for 350 megabytes. Shares of Globe and PLDT fell about 0.1 percent as of 1:29 p.m. Hong Kong time.
Similar promotions helped Globe, a venture of Singapore Telecommunications Ltd., boost mobile subscribers 12 percent to 62.8 million in 2016.
PLDT, which had 61.8 million mobile-phone users as of September 30, is scheduled to report full-year results on February 28.
Globe’s revenue rose 6 percent in 2016 to a record P120 billion, with mobile-data bringing in P34.6 billion. Profit fell 4 percent to P15.9 billion, because of spending on subsidies and network enhancements. The company expects a “highly competitive” market this year.
Makati City-based PLDT is forecast to post a 6-percent drop in net income to P20.7 billion for 2016, while its revenue is projected to fall 1 percent to P168.7 billion, according to analysts estimates compiled by Bloomberg. Pangilinan said on Tuesday there is no need to list PLDT’s mobile unit, Smart Communications Inc., since its parent is a publicly traded company.
PLDT highlighted its changing business when it renamed itself from Philippine Long Distance Telephone Co. last year. The new moniker reflects the “current thrust to decisively shift its business to data-driven services.”
The change isn’t good for near-term earnings until PLDT and Globe do away with steep price cuts, said Julian Tarrobago, who helps manage about $1.8 billion at Maybank ATR Kim Eng Capital Partners Inc. The situation is likely to improve in the next three to five years, and both stocks could offer gains of more than 20 percent, he said.
‘Rational pricing’
“At some point rational pricing will kick in, and both companies will focus on profitability rather than market share,” said Tarrobago, who bought the shares as they tumbled in 2016. “I also think of what demand will be like for mobile-data services in the next 10 years.”
Globe shares have rebounded in 2017, and are trading at levels last seen in October. The 19-percent gain has made it the best stock on the local benchmark. PLDT shares, which fell 34 percent last year, have climbed 6.7 percent this year.
Still, the transition for both companies is far from over, said Riche Levin Lim, an analyst at BPI Securities Corp.
“It’s important to see what the competitive environment will become in the coming quarters,” Lim said.
1 comment
if only the connections are that fast..