PH’s retail sector outpacing telco and property growth

Research paper reports

The country's retail and food and beverage (F&B) industries are not only growing but they have already both outpaced some other big sectors in the Philippines like telecommunications and real estate at least only in terms of profitability.

A comparative outlook at profitability indicators since 1997 shows that retail and F&B companies have averaged higher rates of return than some of the top telecommunications and real-estate companies in the Philippines.

These points to the capital-intensive nature of telco and real-estate industries, which contribute significantly to national infrastructure and development.

An academic research paper by University of the Philippines (UP) Professor Emeritus Epictetus Patalinghug showed that over a longer time horizon, PLDT and Globe Telecom, as well as property companies, such as SM Prime and Ayala Land, are earning below the average rate of returns attained by top Philippine firms in other industries.

For instance, department store chain SM had a return on assets (ROA) of 14.42 percent, while the ROA of a beer company, such as Asia Brewery, reached 12.13 percent.

PLDT and SM Prime, on the other hand, recorded ROAs of only 9.18 percent and 8.49 percent, respectively, while Globe and Ayala Land were even lower in rank with 6.7 percent and 5.96 percent.

"The data showed that as telcos and developers aggressively embark on increasing capital expenditures, they must be able to generate enough cash flow to sustain the needed investments in capital-intensive industries," the statement said.

"More significantly, high capitalintensive industries evidently require high margins to be viable," it added.

Patalinghug said the lack of government spending on national telecommunications networks, and on much needed housing and transport infrastructure, adds to the challenges of competing in the said industries.

Commissioner Gamaliel Cordoba of the National Telecommunications Commission, as cited by Patalinghug, had earlier noted that all other Asean countries have telecoms networks that are wholly owned, partly financed or operated by their respective governments.

It is only in the Philippines that entire broadband networks had to be constructed solely by private companies.

In the meantime, the Department of Information and Communications Technology has already recognized the need for government support in telecommunications and is planning to put up 250,000 Wi-fi access points and 47,000 cell sites in the country before President Rodrigo Duterte’s six-year term ends in 2022.

Infrastructure has become one of the top priorities of the current administration, as well, with public spending on infrastructure projects targeted to reach R9 trillion until 2022.

Some of the planned projects include interisland bridges, railways and subways, disaster resiliency and flood control, airports and seaports.