Globe, PLDT profits drop on intense competition

MANILA, Philippines – The top 2 Philippine telecommunications firms saw a drop in profits in the first 9 months of the year as competition continued to heat up and eat into their margins.

Globe reported that net income after tax for the period dropped 15% to P6.8 billion from P8 billion last year. Rival Philippine Long Distance Telephone Co. only saw a 6% slip, but Globe attributed their greater drop to the high cost of upgrading their network to improve service in the longterm.

Globe’s year-to-date capital expenditures rose 16% to P16 billion largely due to the cost of the modernization and IT transformations.

Both telcos are pointing their fingers at the very strong competitive environment. “While mobile business fundamentals remained intact, unrelenting pressures from competition coupled with capacity constraints on the existing network held off mobile revenues at P16.6 billion, slightly lower by 1% from the 2nd quarter peak of P16.7 billion,” said Globe in a statement.

Each telco is adding customers but seeing average revenues from their users drop as they race to offer the lowest promotions.

Globe for example increased mobile subscriber count 10% in the first 9 months to 32.1 million from 29.1 million as of September 30 of last year. However, gross average revenue per user or ARPU dropped 13% among Globe prepaid customers and 7% for Touch Mobile users.

PLDT executives explained that Globe’s drive for lower and lower unlimited voice promos has forced them to spend more to compete while coming up with a similar promo.

“To counter competition and respond to subscriber preference, Globe Prepaid introduced its strongest unlimited promo to date, GoUnli30, which provides unlimited all-network SMS, unlined on-net calls and unlimited Facebook browsing for an affordable rate of only P30- per day,” said Globe in its 3rd quarter financial report to the Philippine Stock Exchange. Globe also unleashed new unlimited data offers and bucket voice combos.

“We expect competition to escalate especially after the gains that we have realized, but we are prepared for the challenge,” said Globe CEO Ernest Cu in a statement.

The competition may be good for customers but seems to be bad for the telecommunications business.

“We just have to assume that competition will still be there for the balance of the year and even 2013. If it does stabilize to a degree I think that will help both of us,” said PLDT Chairman Manuel V. Pangilinan. – Rappler.com