Extelcom urges National Telecommunications Commission to promote competition

MANILA, Philippines – Express Telecommunications Co. (Extelcom) has asked the National Telecommunications Commission (NTC) to adopt several policies that would further promote domestic competition, even as it stressed that the mobile communications industry remains lucrative.

In a recent meeting with NTC officials, Extelcom said while the Philippine mobile market is large, profitable and growing strongly, it pointed out that the domestic market is not at all competitive with two incumbents capturing the majority of revenue and profit and having extremely stable market shares.

The top two operators account for over 90 percent of the industry subscribers and over 97 percent of revenue and earnings before interest, tax, depreciation and amortization (EBITDA) over the past four years.

Extelcom noted that the Philippines is one of the most profitable mobile telecommunications markets in Asia which produces profits much higher than its regional peers given its level of industry concentration.

Based on industry EBITDA margins of 64 percent, the Philippines by far is one of the most profitable compared with Korea, Bangladesh, India, Pakistan, Thailand and China which have EBITDA margins that range between 27 percent to 50 percent, it added.

Aside from the high profitability of the industry, Extelcom pointed out the relatively “high interconnection rates” in the country as the other bottleneck that the regulators can act upon to promote competition.

Extelcom said the Philippine interconnection rates of over nine US cents a minute is nearly double Indonesia’s 4.5 cents and triple Thailand’s three cents and Malaysia’s 2.5 cents. It is also more than nine times higher that of China, India and Hong Kong which have interconnection rates lower than one cent.

It said the combined pressure from its re-launch and the lowering of interconnect would lower overall industry EBITDA margins, ultimately benefiting the Filipino consumer.

Extelcom is reentering the cellular mobile telephone service (CMTS) business via a $1 billion infrastructure rollout and a shift from its old analog service to one that uses the latest digital technology.

The company aims to achieve a market leading position in the Philippines with its intended re-launch, it said. Officials pointed out that aside from the industry still being lucrative, the other factors that attracted the company is the relatively high churn levels and very low voice usage in the Philippines market which reflects the high tariffs imposed on the average Filipino telecom user.

Food and drinks conglomerate San Miguel Corp. (SMC) is currently in talks with Extelcom’s biggest shareholder TransDigital Extel, said to be controlled by businessman Roberto Ongpin, for the acquisition of TransDigital’s stake in the oldest mobile operator in the country.

However, Lopez-controlled Marifil Holdings Corp. is opposing the sale, saying TransDigital’s stake was illegally acquired. Marifil plans to raise all the way to the Supreme Court the alleged dilution of Marifil’s stake from 46 percent to eight percent.