Just asking

Do we really need another mobile phone service company?

This question crossed the minds of many of our businessmen and fellow consumers following reports that San Miguel Corp., one of the few companies in the Philippines that are now in the expansion mode, is considering going into the cellular mobile telephone service (CMTS) business.

The cellular penetration rate in this country is now at 75 percent of the population. It seems everybody you know owns a mobile phone. And one of every five owns more than one SIM card, with multi-SIM use estimated at around 16 to 17 percent.

As of end-2008, the Philippines has a cellular mobile subscriber base of 67.9, of which around 51.8 percent subscribe to either a Smart or Talk n’ Text service, 36.3 percent to either Globe or Touch Mobile, and 11.78 percent to Sun Cellular.

A huge part of the population utilize text messaging as their basic means of mobile communications. The reason is obvious, text messaging is cheaper compared with voice.

Even the well-entrenched mobile service players are finding it difficult to come up with another revolutionary mobile-phone based application to rev up cellular phone usage. The battlefield at present is not so much on how many additional subscribers they can encourage to switch to their network or how many new subscribers who do not own a SIM yet that they can locate, but how they can encourage existing subscribers to increase their usage, whether this means texting or calling more often or utilizing other value-added services such as Web browsing, downloading of applications, among others.

Thus, CMTS provides are concentrating their efforts on how to increase average revenue per user or ARPU, because at the end of the day, having quality or high income-generating subscribers is more important than having more subscribers, some of which do not even utilize the SIMs that they have purchased.

One good thing about being a latecomer in the CMTS business is you can afford not to repeat the mistakes which the earlier players have committed. They say it is now cheaper to build a mobile network, using the latest technology. But cheaper still entails billions of pesos, and the mobile phone service business is not for the faint-hearted nor for one with a shallow pocket.

One cannot go into the business and start with a limited network. Poor network coverage turns off subscribers and because SIM cards are dirt cheap, they can easily shift to a better network for less than the cost of a burger. Subscribers do not have the patience to hang on to a promise of a better network in the future.

And so let us go back to SMC’s reported plan to acquire CMTS licensee Extelcom and convert the latter’s network from analog to digital.

The challenge for SMC is not only to encourage the remaining 25 percent of the population to finally catch up with technology, but also to make sure that this 25 percent does not go to either Smart, Globe, or Sun Cellular. Not to mention the fact that this three existing players are definitely not going to give the remaining market up for a song.

SMC can also choose to be a niche player in an already mature market. It may not generate as much revenues as beer, electricity, food and beverage, or gasoline, but it can assure a steady flow of income, avoid the huge marketing expenses that go with launching a new product intended for the general population, and prevent clashing head-on with the existing players.

We are pretty sure that Boy Martirez, formerly Smart’s marketing whiz who is credited by many for the mobile phone revolution that is known as electronic loading and who was recently tapped to head Liberty Telecom which SMC president Ramon Ang now chairs, will have a direct hand in building SMC’s mobile phone brand in case that plan pushes through.

As for us consumers, the more the merrier. More players means more competition to offer better priced and better quality products and services. But for the business community,  they cannot help but ask why SMC would be interested in the mobile phone business, a matured sector in an economy suffering from declining consumer purchasing power.

The only thing we can offer to SMC at this point is a sincere good luck.

For comments, e-mail at [email protected]