Fitch flags con­straints to telco com­pe­ti­tion

Business World - - Front Page - By Denise A. Valdez Re­porter

THE IM­PEND­ING AD­DI­TION to the Philip­pines’ list of ma­jor telecom­mu­ni­ca­tions ser­vice providers not­with­stand­ing, the new en­trant faces sys­temic con­straints to full-blown com­pe­ti­tion, Fitch Rat­ings said in a Nov. 7 note e-mailed to jour­nal­ists on Thurs­day.

The credit rater said the pro­vi­sional win­ner of the gov­ern­ment auc­tion for the Philip­pines’ third ma­jor telco — Mis­la­tel Con­sor­tium, com­posed of China Telecom­mu­ni­ca­tions Corp., Den­nis A. Uy’s Udenna Corp. and its sub­sidiary Chelsea Lo­gis­tics Hold­ings Corp. — faces in­dus­try bar­ri­ers that will make the task of chal­leng­ing in­cum­bents PLDT, Inc. and Globe Tele­com, Inc. a tall or­der.

Fitch said it ex­pects the third telco to “ini­tially… com­pete ag­gres­sively on price as it strives to grab mar­ket share in an al­ready highly sat­u­rated mo­bile mar­ket” and its chal­lenge “to tem­per rev­enue growth and raise the capex pres­sure on PLDT, Inc. and Globe Tele­com, Inc.”

PLDT Chair­man Manuel V. Pangili­nan said in a brief­ing on Thurs­day that the com­pany is likely to main­tain cap­i­tal ex­pen­di­tures at P58-60 bil­lion for 2019, while Ma. Yolanda C. Crisanto, Globe se­nior vice-pres­i­dent for Cor­po­rate Com­mu­ni­ca­tions, said in a mo­bile phone mes­sage also yes­ter­day that capex will keep close to spend­ing in the last two

years. PLDT has kept capex guid­ance at P58 bil­lion this year, while that of Globe of $100 mil­lion.

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.

“The sever­ity of the threat from a new en­trant is un­clear at this stage,” the debt watcher said, adding that “gov­ern­ment in­ter­ven­tion may be needed to ac­cel­er­ate in­dus­try re­forms to raise com­pe­ti­tion.”

Such in­ter­ven­tion in­cludes man­dat­ing in­fra­struc­ture and tower shar­ing, spec­trum re­dis­tri­bu­tion as well as re­moval or re­duc­tion of the 40% for­eign own­er­ship cap on pub­lic util­i­ties.

“Even af­ter set­ting aside spec­trum fre­quen­cies to the new telco, the in­cum­bents still pos­sess a ma­jor­ity of the rights across a range of spec­trum fre­quen­cies…” Fitch noted, adding that this lim­i­ta­tion may push the third ma­jor telco to in­vest more in cost-ef­fec­tive long-term evo­lu­tion (LTE) tech­nolo­gies to ac­cel­er­ate net­work roll­out.

The debt watcher noted, how­ever, that in­cum­bents PLDT and Globe have al­ready had a head­start even in the LTE space.

Globe said last week it is close to achiev­ing 95% na­tion­wide cov­er­age for its LTE roll­out, while PLDT said its LTE base sta­tions not to­tal some 14,300.

Over­all, Fitch — which has a “BBB” credit rat­ing for PLDT, or a notch above min­i­mum in­vest­ment grade, and “BBB-” for Globe, or min­i­mum in­vest­ment grade, both with “sta­ble” out­look (mean­ing debt rat­ings are likely to be sus­tained over the next 1218 months) — said it has a neg­a­tive sec­tor out­look on the Philip­pine telecom­mu­ni­ca­tions mar­ket due to in­ten­si­fy­ing com­pe­ti­tion and ris­ing debt.

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