Telco capex to stay elevated next year

The country’s two telecommunications giants will continue to allocate jacked-up levels of capital spending next year, but it’s not because of the entry of a new competition in the form of a third player, or so they say.

Both PLDT Inc. and Globe Telecom Inc. are looking to earmark a sizeable level of capital expenditures for 2020 to further beef up their networks to better serve the growing and evolving needs of their customers.

PLDT president and chief executive officer Manuel V. Pangilinan said it is likely that the group’s capex would remain elevated next year to continue significant improvements on its network in the wireless side, as well as to pave way for 5G. “As to what level, we still have to wait. It is fair to state that capex and forecast revenues and expenses related to next year are still a work in progress,” he said.

Globe chief technology and information officer Gil Genio said the company is also likely to maintain its current capex level for next year.

“So if you talk about the P63 billion or so that we have already announced, that is probably going to be similar year-on-year,” he said.

Genio said the sustained high level of capex next year is being driven by mobile data growth and the need to put up additional sites nationwide.

“So whether there is a third player or not, we have to serve customers as they expect us to add capacity and more sites and that’s what we are responding to. We’re not adjusting capex for building or speeding up based on a third party or a third player. It’s really about serving the needs,” he said.

Both PLDT and Globe have appropriated record high levels of capex this year.

PLDT has allocated a record P78.4-billion budget for its capex this year, a significant jump from its P58 billion budget in 2017.

PLDT said about 75 percent of this year’s capex budget has been poured as of end-September into network and information technology systems which includes investments in increased LTE coverage and capacity, expanded fiber transport to support both fixed broadband and mobile data, and new international cable networks.

Globe, meanwhile, has ramped up its capital spending to P63 billion this year from P43.3 billion last year to support the continued expansion and enhancement of its data network.

“We forecast average capex intensity to stabilize at 35 percent to 37 percent in 2020, as incumbent telcos strengthen their network ahead of the launch of the third telco, Dito Telecommunity, some time in 2020,” Fitch Ratings said in a report last week.

In its November report last year, Fitch Ratings said it is expecting increased capex pressure on telco giants PLDT and Globe with the looming arrival of a third telco player.

Department of Information and Communications Technology undersecretary for operations Eliseo Rio, for his part, said earlier that PLDT and

Globe have started preparing for tougher competition since last year by allocating recordhigh capex for 2018, and again this year.

“The standards Dito committed is much higher than what Globe and Smart has now. Globe and Smart, as you can see, are also improving their network so that when and once Dito operates, their subscribers will not leave them,” Rio said.

Dito, a consortium composed of state-owned China Telecom and Davaobased businessman Dennis Uy’s Udenna Corp. and Chelsea Logistics and Infrastructure Holdings Corp., has committed to increase basic internet speed to 55 mbps and cover 84 percent of the country’s population over a fiveyear period through a total of P257 billion investment.

The new major player is aiming to capture nearly a third or 30 percent of the market within its “first few years of operations” as part of its commitment to provide worldclass telecommunications services in the country.