Interesting times

This year and the next will be very interesting for the telecommunications industry with the entry of one of the country’s biggest and most active business conglomerate which has promised to change market dynamics for the benefit of the Filipino consumer.

San Miguel Corp. now indirectly owns 40 percent of Eastern Telecommunications Philippines Inc. (ETPI), one of the oldest telecom companies in the country (it was established over 130 years ago), after SMC wholly owned subsidiary Vega Telecom acquired 100 percent of AGN Philippines Inc. (AGNP), a company that owns around 40 percent of ETPI.

Vega also owns 39.3 percent of Liberty Telecom, and 75 percent of three companies that own 100 percent of Bell Telecommunications (BellTel). And it’s just a matter of time before Vega acquires Express Telecommunications (Extelcom).

Liberty has the broadband frequencies while both BellTel and Extelcom have mobile network frequencies. ETPI on the other hand has international gateway facility licenses and offers full-service telephony and managed telco services, as well as data and internet leased circuits. 

Nobody knows exactly what SMC president Ramon Ang and his telecommunications guys are up to exactly but we are pretty sure it will be on a grand scale.

And what is sure is that with SMC’s huge warchest (not to mention Bobby Ongpin’s own warchest), whatever products and services he will be coming up with will give the existing players a run for their money.

(Note: Top Frontier, which is 49-percent owned by SMC, and 51-percent controlled by an investor group that includes Ongpin, Iñigo Zobel and Joselito Campos, was given “continuing” and “exclusive” option to purchase and acquire SMC chairman Danding Cojuangco’s 15-percent equity interest in SMC until Nov. 19, 2012.)

(At present, Top Frontier is the beneficial owner of 54.6 percent of SMC’s class “A” shares and 55.8 percent of class “B” shares. It had voting rights to a total of two billion shares representing about 89.5 percent of the beer-based giant’s outstanding capital stock. If Top Frontier opts to buy the 493.37 million shares in SMC owned by the 44 corporate stockholders associated with Cojuangco’s group, Top Frontier will end up owning 60 percent of SMC.)

Despite observations that the telecom industry is already saturated and is a mature market, Mr. Ang believes that there is very limited “true competition” given that two players control over 90 percent of revenues. That would of course be the Philippine Long Distance Telephone Co. (PLDT) group and the Ayala-backed Globe Telecom. He also observers that the Philippine telecommunications industry remains a highly profitable industry with a 65 percent EBITDA (earnings before interests, taxes, depreciation and amortization) margin.

He says that the industry is ripe for a new entrant like SMC who would take advantage of its distribution scale and local market knowledge, adding that they are well positioned to launch their mobile broadband services given their access to various fourth-generation frequencies.

Take note of the words “mobile broadband services.” Sources say this will not be limited to Liberty Telecom’s Wi-Tribe broadband dongles currently out in the market.

Mr. Ang promises that while the market outlook for 2011 will remain the same, this should drastically change in 2012 when SMC completes it roll out and the Filipino telco consumers are given “a highly reliable and intelligent network, significantly superior services, and faster connectivity.”

He says SMC wants to position itself as a very strong player in the local telecommunications industry in a bid to further improve telco services in the country and bring down rates to more affordable levels.

It will definitely be interesting times for the telco industry.

What would be better for the telco industry, and the Filipino people, though, is if new entrants like SMC are able to expand the pie rather than compete for what’s currently available – new services, new technologies aimed at giving the consumer alternative, better, and more affordable means of communication. 

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