On the surface, the Philippines telecoms market underwent a lot of change in the past six months.

After moving ahead of Smart with a market share of 51.5 per cent in Q4, Globe Telecom’s year-end results showed it surpassed its long-term rival in mobile revenue the same quarter. Globe’s Q4 mobile turnover rose 2 per cent year-on-year to PHP23.6 billion ($468 million) compared with Smart Communication’s mobile revenue of PHP22.8 billion, which fell 15 per cent from a year earlier.

While Globe can claim top positions in mobile connections and revenue, the two players are ranked equally in mobile broadband speeds, according to a new report from OpenSignal.

Smart led the market with an average LTE download speed of 9.9Mb/s, with Globe trailing at 7.4Mb/s. However, Globe was well ahead in LTE availability – 55.3 per cent vs 40 per cent for Smart. Combining 3G and 4G connections and accounting for the availability of each network, OpenSignal calculated the average overall speed for both operators at around 3.3Mb/s, which is far below regional and global averages. The average LTE download speed in the country rose 13 per cent sequentially to 8.65Mb/s in Q4, but the Philippines remains near the bottom of global LTE rankings.

To address its coverage gap, Smart said in its 2016 annual report it plans to more than double the number of 4G base stations deployed to about 5,700 to boost LTE coverage to 70 per cent of the population by the end of this year.

Newcomer threat
However, both players now face an existential threat in the form of the possible entry of a third mobile operator as well as the prospect of a national broadband network run by a newcomer.

The National Telecommunications Commission (NTC) said last October it aims to sell unused 3G and 4G spectrum by the middle of this year in an auction open only to new mobile players. The announcement came shortly after Philippines president Rodrigo Duterte warned the county’s two dominant mobile operators he will open the market to Chinese competition if they fail to improve their poor service.

Department of Information and Communications Technology (DICT) secretary Rodolfo Salalima said if any local franchisee wants to be the third or fourth operator, then “bring in a foreign partner with the legal, technical, and financial credibility and capacity to mount a credible and effective competition against existing telcos.”

Five local companies reportedly have expressed interest in participating in the auction for a third mobile licence, but none have stepped forward with concrete plans or named a foreign partner.

The president also recently approved a plan to build a national broadband network, which will host a government portal and is aimed at accelerating the deployment of fibre and wireless technologies to improve internet speeds across the country, particularly in underserved rural areas.

Independent study
As the auction nears and DICT prepares to carry out a feasibility study on the National Broadband Plan next quarter, Globe yesterday issued a press release titled “Government is only ‘realistic’ third player in local telco industry”.

Citing a new study, the release stated: “The market realities of capital intensity, sunk costs and economies of network size prevent a realistic entry of a private third player. Only a publicly-owned third player, that builds a ‘last mile’ network that is financially not viable for private operators to build, can complement the coverage gap in the present network.”

A summary of the study, which was sponsored by Globe, went on to say: “However, the entry of the government as a third player creates an opportunity for active government intervention. Also this could lead to false expectations of improving quality of service at a lower price when the reality is that high quality can only be produced if the acquisition of expensive infrastructure investments will earn an attractive or competitive rate of return.”

Just as the duopoly put aside their rivalry to join forces to purchase the telecoms assets of San Miguel Corp (SMC) in May 2016 to thwart the entry of Australia’s largest mobile operator Telstra in partnership with SMC, expect the two to unite in a very public campaign aimed at questioning the financial viability of a third player entering the market at such a late stage.

While the Philippines has a new market leader and internet speeds have climbed, the telecoms landscape certainly improved a lot less than many consumer groups and the government would have hoped. Let’s see if 2017 will bring more significant change.

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.