Philippines: Low ARPU vs high mobile engagement

10 DEC 2014
Philippines

NEW ANALYSIS: Mobile internet usage is soaring in the Philippines — almost 40 per cent of mobile subscribers have 3G and a quarter have a smartphone. Ninety per cent of the country’s active internet users regularly access social media. Yet only half the population has a mobile connection and ARPU has shrunk below $3.50, according to a country report by GSMA Intelligence.

The 35-page report published in early December, summarised here, highlights the key opportunities and challenges for mobile operators and investors.

The country, after years of stagnation, has been one of the fastest growing economies in Asia – expanding an average of 11 per cent annually over the past three years.

It has the fastest growing internet population in the world, with penetration rising from 6 per cent in 2008 to 37 per cent last year, according to the World Bank.

With just 2.6 per cent of the population subscribing to fixed broadband, mobile is the primary device for connecting to the internet. Mobile internet adoption is 62 per cent, which according to the ITU is the third highest in Southeast Asia behind Malaysia and Thailand.

Although the country of 99 million people has 116 million mobile connections, only half the population has a mobile phone. The connected half, however, has moved quickly beyond feature phones – 39 per cent of mobile subscribers have 3G connections and 25 per cent own smartphones. Just 9 per cent had smartphones two years ago.

As mobile penetration has plateaued at around 50 per cent over the past two years, unique subscriber growth has slowed to 4 per cent this year. Adding to operators’ woes is intense price competition, which has pushed ARPU lower since 2011. It is now hovering around $3.30 a month. Meanwhile, churn has increased since falling to about 15 per cent in 2012 and is now above 20 per cent a year.

The Philippines is 96 per cent prepaid (each subscriber has an average of two SIM cards), so just 4 per cent of subscribers are premium customers, with postpaid ARPU ranging from almost $25 at Globe Telecom to $15 at Smart. Just 4.75 per cent of Globe’s 42.7 million subscribers are postpaid, yet the segment accounted for 39 per cent of total mobile revenue.

The push to 4G
The country’s two dominant mobile players, which together manage 99 per cent of all mobile connections, both launched 4G services in Manila and a few other cities in 2012, but the high-speed service accounts for less than 2 per cent of their total connections.

Smart announced plans earlier in the year to extend its LTE network to all major cities by the end of the year and reach 50 per cent of the population as well as an investment of $714 million to expand 3G coverage from 71 per cent of the population to 100 per cent.

Faster networks are of course driving smartphone adoption, which is forecast to increase to 54 per cent in 2016. Early next year sales of smartphones are expected to surpass feature phones, and smartphone connections are on pace to outnumber feature phone connections (about 63 million) by the end of 2016.

The sharp rise in smartphone usage has not been driven exclusively by brand-name imports. Like in China and India, local brands are quickly gaining market share. While Nokia and Samsung led in Q3 with 28 and 24 per cent shares respectively, homegrown Cherry Mobile had a 17 per cent share and local rival MyPhone had a 4 per cent share.

GSMA Intelligence said the two firms are launching new models almost monthly and are catering to the budget, mid-range and high-end segments. Cherry Mobile claims 60 per cent of the country’s low-end market.

Messaging goes social
It is estimated that the Philippines generates about 10 per cent of the global SMS volume. The average Smart customer sent 520 messages a month in Q2. That compares to 371 per connection a month for an XL Indonesia customer and 64 per connection per month for a China Mobile subscriber.

With messaging accounting for 37 per cent of the operators’ recurring revenue, they are particularity vulnerable as new smartphone users switch to social messaging apps like KakaoTalk, LINE and WeChat. Smart and Globe reported a 3-5 percentage point drop in messaging contribution to service revenue in the last year.

Both operators have experimented with zero-rated services with the likes of Facebook and Wikipedia to increase uptake of data services. These have proved to be extremely popular.

Ninety per cent of the country’s active internet users last year said they regularly access social media – giving the country the title of “social networking capital of the world”. Additionally, users in the Philippines spend more time on social media than in any other country in the Asia-Pacific region – an average of four hours a day.

Social media has also seen many innovative uses in the Philippines, such as using Twitter to crowdsource and coordinate disaster response efforts following typhoons or an earthquake, and using Facebook and Instagram to stage a protest in response to a proposed hike in train fares.

Author

Joseph Waring

Joseph Waring joins Mobile World Live as the Asia editor for its new Asia channel. Before joining the GSMA, Joseph was group editor for Telecom Asia for more than ten years. In addition to writing features, news and blogs, he...

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