Investment firm revises outlook on telecom sector

CEBU, Philippines - Online investment powerhouse COL Financial has revised its forecast for the country's telecommunication industry, in light of the changing market dynamics, and other pressures.

In its latest market advisory, COL Financial warned that aside from the anticipated elevated capex requirements, the two major players – Globe Telecom and Philippine Long Distance Telephone Company (PLDT) – are facing a serious threat with the entry of Australian  telecom firm, Telstra. 

The investment firm believe that Telstra's entry to the Philippines poses additional risks to the profitability of both incumbent players.

The changing prospects, including the growth of data's contribution to service revenues (as demand from traditional services weaken), and increasing capex requirements threaten the players' revenue and profitability.

"Capex is expected to remain elevated as the two telcos continuously invest to upgrade their respective networks in light of increasing data. This in turn is anticipated to push expenses up and drag core earnings down," the COL Financial market analysis revealed.

On the other hand, the investment powerhouse anticipates data to continue driving revenue growth, with service revenues for the industry estimated to increase by 3.3 percent to P283.8 billion in 2016 as smartphone penetration continues to rise.

This will, however, offset the higher capex needed to boost the capacity for data requirement.

In an earlier interview with PLDT head for public affairs Ramon Isberto, he said, the telco leader is putting its foot forward allocating significant investments to master the technology that will well support the fast adoption of digital services.

Isberto said that the telecom industry in general is not threatened by the entry of other foreign telecom players, but  is now rattling off to improve its capacity to serve the fast growing demand for data bandwidth.

Last year, PLDT, including its subsidiary Smart Communications, spent P43 billion in capital expenditure to upgrade its network capacity. This year and in 2017, the company poses to spend similar or higher amount of investments.

"We have to elevate our level of investments, to fortify and increase the capacity of network and support the demand for data services," he emphasized.

In 2015, smartphone penetration in the Philippines stood at 40 percent. This is expected to grow much faster, as  prices for smartphone gadgets continue to dive and becoming more pocket friendly. – (FREEMAN)