High costs a barrier to entry of new telco players – Globe

Globe Telecom Inc. said market entry for a new telco would be difficult due to high capital costs needed to build a network, as well as bureaucratic red tape.

“I have said it time and again, Globe is ready and willing to compete with any player old or new. However, any new player/s who want to come in should build incremental infrastructure in order to improve telco services in the country. The new player should not sit idly by waiting for existing operators to just open up and use whatever infrastructure is available because doing so will not help solve existing industry challenges,” Globe president and CEO Ernest Cu said during a multi-stakeholder forum.

Cu said current industry barriers were not created by incumbent players but a result of a combination of high network spending and difficulties in network deployment due to bureaucratic red tape.

“This industry is very difficult to penetrate because the barriers to entry are very expensive to overcome and because deployment of networks are very challenging due to local government issues,” Cu said.

He cited San Miguel Corp. ( SMC) which was initially planning to launch its telco business this year.

“How can this supposed player compete when they cannot deploy a network? When we found San Miguel, who was threatening to launch a network, they only had 230 cell sites. That is after two years of trying to build a network. You’ve heard about them trying to build their network but in reality, you go there, there’s nothing in there,” he said.

Globe and PLDT Inc. jointly purchased the telco assets of SMC in May. After the buyout, SMC’s telco sites had to be dismantled due to a lack of incremental value.

“Globally, there are many markets where late comers to a mature, highly competitive market never make it. The late entrants end up being bought by one of the other players,” Cu said.

Cu cited Sun Cellular which challenged Globe and PLDT’s wireless arm Smart Communications Inc., but ended up being acquired by the dominant player. “While good disruption tends to bring out the best among players, the acid test is whether they are able to sustain their business,” he said.