Digitel to invest $400M on cellular network expansion

Digital Telecommunications Philippines Inc. (Digitel) is investing a total of $400 million until next year to improve its cellular phone network capacity.

Digitel chairman James Go said the company is investing $200 million this year and another $200 million next year in a bid to build a strong network for mobile phone subsidiary Digital Mobile Phils. Inc.’s (DMPI) call and text unlimited offering.

DMPI was spun-off as a separate company to handle the mobile phone operations through the Sun Cellular brand while Digitel continued to operate the landline business.

"We want to build our capacity to 10 million next year from six million by the end of 2005. Contrary to perception, our finances improved since we launched Sun Cellular’s 24/7 call and text unlimited but we have to achieve critical mass," Go said.

By July this year, Sun Cellular’s capacity can accommodate three million subscribers. Sun Cellular has around 1.7 million subscribers and the target is to reach three million subscribers by yearend.

Company officials expect DMPI to post a positive EBITDA (earnings before interest, taxes, depreciation and amortization) by the middle of 2005, a positive EBIT (earnings before interest and taxes) by 2007, and net income by 2008.

They added that they will be pushing Sun Cellular 24/7 as still the best value proposition. "We want to give more people the opportunity to come in," said DMPI head Charles Lim.

Officials described the company’s expansion as "very aggressive" especially since its competitors – Globe Telecom and Smart Communications – were ahead by 10 years.

JG Summit Holdings, the flagship holding company of the Gokongwei group, earlier revealed that it is setting aside nearly P70 billion this year and next year for the continued expansion of its food, property, telecommunications, airlines and petrochemicals businesses.

JG Summit president Lance Gokongwei said the programmed capital budget is quite significant because the group is determined to further build its businesses to improve profitability. Of the total capital budget, $300 million will be used to bankroll the continued expansion of the group’s wireless business which has gained a niche in the lucrative telecommunications market by offering unlimited calls and text messaging for its subscribers.

Sun Cellular set off the price war when it launched in October of last year its 24/7 subscription plan, which allowed subscribers to call and send text messages within its network without limit at prices of P250 for 30 days and P100 for P10 days. The prices of 24/7 are now P350 for 30 days and P100 for seven days. Sun Cellular also offers unlimited text messaging for P50 for seven days and P150 for 30 days.

JG Summit reported a 67.1 percent jump in net income for the first quarter this year on strong earnings of its various units, particularly food and real estate. Its revenues for the January to March period this year grew 15.2 percent to P16.4 billion from only P14.23 billion in the same period in 2004. This was driven by the continued improvement in sales and revenues of the company’s core businesses and the revenue contribution of its mobile phone business as well.

Digitel pumped in P2.15 billion in revenues, 22 percent higher than the P1.76 billion reported a year earlier. Despite higher revenues, it incurred a net loss of P451.29 million, up 50.7 percent from the previous year’s P299.46 million due to higher operating expenses and charges.