RP cellular penetration rate seen at 40% as of end-2005

The country’s cellular penetration rate is estimated to have reached between 35 and 40 percent as of end-2005, meaning that much of the total Philippine population owns mobile phones.

Gartner, an international research company, has earlier projected that mobile connections in the Philippines will grow at a 6.5 percent compound annual growth rate through 2009. Service revenues will grow at 6.4 percent compounded annual growth rate through the forecast period, it said.

A highly placed official of leading mobile operator Smart Communications told The STAR that the 35 percent to 40 percent takes into account those holding multiple SIMs. "I am discounting the figure with multiple SIM holders which account for about 20 percent of the base. So roughly, 10 percent should be removed," the official said.

Smart subscribers are expected to reach 20.4 million as of end of last year, but this still does not take into account the figure for multiple SIM holders.

As of end-September 2005, Smart and its subsidiary Pilipino Telephone Inc. (Piltel) reported a combined subscriber base of 20.8 million. Earlier, Smart president and chief executive officer Napoleon Nazareno said the company is expected to post real growths in subscriber numbers beginning this year after the company has completed the process of weeding out subscribers which have not been topping-up and therefore, not contributing revenues to the company.

Top rival Globe Telecom has already reported a 12.4 million subscriber base as of Dec. 31, 2005, or the same as the end-September 2005 figure or lower than the end-2004 number of 12.5 million.

Digitel president Lance Gokongwei meanwhile told The STAR that the end-2005 subscriber number for their Sun Cellular brand will likely remain at 1.7 million.

Total subscriber base for the three mobile operators will likely reach 34.5 million, without discounting the 10 percent for the multiple SIMs, for a mobile penetration rate of 39 percent given a Philippine population of 87.8 million.

Less the discount for the multiple SIM, industry subscriber base will be around 31 million, or a cellular penetration rate of 36 percent.

Smart and Globe both said they were able to fully weed out non-revenue generating SIMs by end-2005. The SIM-swapping activities of the two companies, which they terminated middle of last year, unnecessarily bloated subscriber numbers as they were counting as subscribers even those who had multiple SIMs that were not being topped up. Once a SIM is sold, it was considered as part of the subscriber numbers.

Globe president and CEO Gerardo Ablaza said they have not yet made projections for the cellular penetration rate for this year. "We have not finalized that projection yet. We should first see how the first quarter of 2006 goes as that would be the first full quarter after the SIM clean-up," he informed The STAR.

Ablaza has noted that 2006 will be a challenging year for the mobile telecommunications industry, especially with the entry of new players offering 3G services "which may change subscriber behavior and the market landscape."

Aside from Globe, Smart, and Digitel, CURE was granted 3G frequency by the National Telecommunication Commission (NTC). CURE has reportedly tied up with ISM Communications, which now owns majority of Eastern Telecommunication Phils. Inc. (ETPI). The NTC is also set to award soon the last 3G frequency either to BayanTel, Next Mobile, Multi-Media, AZ Communications or Pacific Wireless.

He added that in order to remain competitive, Globe has to continue offering better propositions to its customers that would increase usage and the average revenue per user (ARPU). "We hope to build on our fourth quarter momentum," he said.

Gokongwei for his part agrees with the view of top officials of rivals of Smart and Globe that market growth this year will be difficult.

Morgan Stanley earlier downgraded PLDT from "over-weight" to "equal-weight" with a target price of P1,830 per share after a strong rally in the company’s shares over the past two years. It said that while the firm’s fundamentals remain good, there is limited room for positive surprises in future as the mobile phone market has matured and because there is risk that consumers may prefer voice over internet protocol (VoIP) services rather than using mobile phones.

It said it prefers Globe Telecom to PLDT, but given the low liquidity in Globe shares, Morgan Stanley recommends telecommunications investors to shift to other issues in East Asia. An "equal-weight" call indicates that the stock’s total return is expected to be in line with the total return of the country’s MSCI index on a risk-adjusted basis over the next 12 to 18 months.

Philippine Long Distance Telephone Co. (PLDT) has expressed confidence that it is taking the right steps in developing new revenue streams, especially in the landline business, that could more than offset slower growths in the cellular business.

In another development, in its bid to increase mobile phone usage and maintain market loyalty, leading wireless services provider Smart Communications has further made texting more affordable and budget-friendly to its prepaid users with its latest offering.

Smart Load All Text 10, which will be sold at the suggested retail price of P12 or lower, will give subscribers 10 text messages (SMS) and P1 worth of airtime while Smart Load All Text 20, which will be sold for P23 or lower, will give them 20 SMS and P1 airtime.

As an added innovation, the 10 or 20 SMS do not expire and may be accumulated, so subscribers may use them anytime they want. Subscribers may also use them for texting other networks. The P1 airtime load, however, will expire after one day for Smart Load All Text 10 and two days for Smart Load All Text 20.

Subscribers have to maintain at least P1 airtime load to use the SMS. "This is part of Smart’s wide range of innovative and affordable load packages designed to address the diverse communication requirements of our subscribers," according to Butch Jimenez, Smart head for wireless consumer division.

Aside from the non-expiring text, prepaid subscribers who top up for the Smart Load All Text will enjoy free overnight texting from 11 p.m. to 7a.m., during the 30-day promo period from Feb. 12 to March 13, 2006.

One day of free overnight texting will be given to those who will get Smart Load All Text 10. For those who will get Smart Load All Text 20, two days of free Overnight Texting will be given. Smart Buddy, Talk ’N Text, Smart Kid Prepaid and Addict Mobile Prepaid subscribers may purchase Smart Load All Text from SmartLoad retailers.

"We are committed to providing our subscribers with even more cost efficient telecommunications services," Jimenez added.