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MANILA, Philippines – Digital innovation is now the name of the game, and this has pushed the Philippines’ telecommunications and television companies to downsize their staff, hike their capital spending budget exponentially, and identify new engagement models to stay afloat in today’s digital wave.
“Over the past months, we have heard major telcos and broadcast networks increasing their capital expenditures, laying off employees, and partnering with international content providers. These are all part of digital adaptation,” International Data Corporation (IDC) IT Services Lead Anthony Rejano said in an interview.
He said companies will lose their competitive advantage if they do not develop a comprehensive digital strategy and rethink their business and operating models.
“There is no time to lose for the telco and media industries, as technology change accelerates significantly and new digital platforms and devices are emerging,” the IDC IT Services Lead said.
Mobile Internet, broadband rule
Gone are the days when what consumers all needed was a clear signal for their telephones and TV sets. Now, they want to be able to do everything on their smartphones, demanding the best experience at the best price.
This change in consumer demand is seen in the revenue share of telco providers. Their revenue from mobile Internet and broadband business continues to outgrow those of the traditional voice and text services.
Philippine Long Distance Telephone Company’s (PLDT) and Globe Telecom Incorporated’s legacy revenue growth has shown signs of stagnation since 2012.
Mobile voice average revenue per user (ARPU) has been on a downward trend and is expected to continue to decline in years to come, IDC’s Rejano said.
Mobile data and broadband revenue has been making up for the decline of legacy services such as voice and SMS, which are rapidly being supplanted by “over-the-top” applications like Viber and WhatsApp.
Traditional businesses, which are voice and SMS, are already “mature,” so the battleground is now shifting to the mobile Internet and broadband business, PLDT said.
Globe President and CEO Ernest Cu said his company’s revenue growth are now driven by “rapid customer base expansion of both mobile and broadband, the continued strong mobile data adoption, and increasing smartphone penetration among its customers.”
Raising capital spending
Furthermore, an expected mobile data penetration rate in the Philippines is accelerating demand for network investment.
The country’s two major telecom companies, Globe and PLDT, hiked their capital spending budget for the year, mainly because of the need to expand their 3G and 4G networks.
“They need to invest more in next-generation networks that can absorb the increasing wave of data that’s also putting a big pressure on their margins,” IDC Country Head Jubert Alberto said in a separate interview.
PLDT Chairman Manuel Pangilinan said that PLDT’s P39-billion ($874.61 million) capital expenditures (capex) for 2015 will likely “lie north, as we accelerate the build-up of 3G and 4G as well as expand our transmission backbone.”
Its initial P39-billion ($874.61 million) capex for 2015 is even higher than the P34.8 billion ($780.18 million) the firm spent last year.
Globe has also raised its capital spending budget this year to P37.95 billion ($850 million) from P29.34 billion ($650 million) to further boost its mobile data business.
“We believe that with our modernized data-ready network and our strong commitment to innovation, powered by our collaborative partnerships with global content providers, we can achieve sustainable financial growth moving forward,” Cu said.
As new businesses continue to outpace their traditional services, major telecoms and networks in the country needed to realign the skill sets of workforce, obliging most of them to conduct a manpower reduction program.
PLDT Public Affairs Head Ramon Isberto said in April that his company targets to lay off around 450 employees by the end of 2015, to “align the skill sets and expertise of the telco’s workforce.”
The company has 17,496 employees as of end-2014.
“We used to be much bigger, but the business is changing and we need people who have digital technology skills,” Isberto said.
Meanwhile, Globe Corporate Communications Head Yoly Crisanto said the Ayala-led telco has no plans of reducing manpower this year.
Globe has over 6,000 employees nationwide as of end-2014.
“Our costs are down during the first quarter, so we have been effectively managing costs without laying off people. Also, we saw the shifting needs of our customers way ahead,” Crisanto said.
Finding strategic partners
PLDT and Globe have also partnered with several international content providers and Internet companies to adapt to the demands of digital consumers.
Digital customers, according to IDC, use several ways to interact with brands and expect a unified treatment.
“Operators are reacting to these needs and have started transforming into more customer-centric and integrated organizations. This is why they partner with many content providers,” IDC’s Alberto said.
PLDT over the past months partnered with Disney, Deezer, and Front Seat – a local online entertainment site – to bundle music, games, and e-books with its offers.
In April, it also forged a strategic alliance with Cignal Digital TV to introduce Triple Play, which allows PLDT HOME DSL subscribers to enjoy a 3-in-1 product bundle. This consists of broadband from PLDT HOME DSL, TV access from Cignal TV, and a PLDT landline connection.
Globe continued to forge strategic partnerships with international content providers and Internet companies such as Google, Facebook, and Viber. Globe also teamed up with Spotify, a music streaming service worldwide, and the National Basketball Association (NBA) for sports content.
Just this year, Globe partnered with HOOQ, Asia’s first online entertainment service and a joint venture of Singapore Telecom with Sony Pictures and Warner Brothers, allowing the Philippines to become the first country in Asia to launch the service.
“Globe is at the very center of the Filipino digital lifestyle. For one, our network is built for data traffic more than call and text traffic these days. Much of what content that flows through smartphones these days comes from partnerships Globe built,” Cu said.
“Whether it’s social media, it’s Facebook, it’s Music, it’s Spotify, videos through NBA and Disney. It’s all digital lifestyle. And now, even e-commerce with Lazada and Zalora,” the Globe chief added.
For PLDT, its executive vice-president Ariel Fermin said he will deliver what he calls “long-term health” for PLDT by delivering “seamless digital experience” through convergence.
Convergence means integrating several telecom and entertainment services, such as broadband Internet access, fixed and mobile telephone, and TV.
But for Fermin, it’s more than that. “It’s about the freedom of customers to multitask and use any service under any device they choose to,” he said. – Rappler.com
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