‘Third player’ entry drives defensive capital spending by PLDT, Globe

THE ENTRY of the “third player” into the telecommunications market is expected to drive even heavier capital spending at incumbents PLDT, Inc. and Globe Telecom, Inc. on top of their current network investments.

While the impact on the incumbents’ financial performance is not yet clear, given that the third player will be selected by the government within the year, the current telcos will be pushed to increase their capital expenditure (capex).

“The entry of a new player has not yet affected their bottom line performances, but it’s a factor in capex spending,” Jervin S. de Celis, equities trader at Timson Securities, Inc. said in a text message.

He added that the third player may have also been a factor in the two telcos’ race towards making commercially available fifth-generation (5G) services.

“If anything, the threat itself pushed them to increase capex,” Luis A. Limlingan, head of sales at Regina Capital Development Corp. said in a message.

The government announced in December the launch of a selection process for a third player to compete with PLDT and Globe. It is set to name the new entrant within the year. Currently, the draft terms of reference (ToR) are up for public hearing and final approval of the oversight committee.

Last year, even before the government announced plans to open up telecoms, S& P Global Ratings said that Southeast Asian telecommunications companies will have to adopt more aggressive financial policies to stay competitive in a data-driven revenue landscape, or face irrelevance.

PLDT is embarking on a P250billion five-year spending program, with around P58 billion already earmarked for 2018. PLDT has said it will double its fiber and hybrid fiber broadband capacity to over 2.2 million ports, with about 650,000 of the additional ports for fiber and another 550,000 for hybrid fiber broadband. Its wireless unit Smart Communications, Inc. aims to double the number of long- term evolution ( LTE) base stations to about 17,700 and increase the number of LTE- equipped cell sites to over 6,800.

Globe is spending around P43.5 billion this year, and is expecting to sustain the high capex until 2020. It spent P6.6 billion in the first quarter for infrastructure improvement.

Globe Telecom, Inc. is set to roll out its 5G home broadband service by the second half of next year.

Smart announced its research and development plans for a 5G rollout. It has not yet specified a rollout date but aims to have a 5G-ready network by 2020. The company has launched 5G Technolab, a facility that will be tasked with research and development, standardization, and testing of 5G technology.

For the first quarter of the year, PLDT’s net profit was P6.97 billion, up 41% from the a year earlier.

Globe posted a net profit of P4.6 billion in the first quarter of 2018, up 23.69% year on year.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls. —