To speed up internet services: US envoy says Philipppines needs to allow telco competition

CEBU, Philippines - The government should allow "more competition" in the telecommunications industry in the Philippines to provide better Internet services to consumers, said Ambassador David Thorne, senior advisor to the Secretary of United States.

In an interview with the Cebu press in his visit here last Friday, Thorne emphasized the importance of strong digital connectivity to the growth of business startups especially technology-based.

"You need more competition and I don't quite know why there's only two Internet companies. I think the [Philippines] could change the legal structure to create more competition," Thorne noted when asked to comment about the duopoly in the Philippine telecoms industry which is being dominated by the Philippine Long Distance Co. (PLDT) and Globe Telecom Inc.

Although he admitted he was not familiar with how the legal structure in the country works, he pointed out that there should be more competition, saying that it actually works in the United States.

"We have a lot of competition [in US]," Thorne said.

Apparently, a third player in the Philippine telecoms sector is looming, as reported previously.

In a disclosure to the Philippine Stock Exchange in September last year, diversified conglomerate San Miguel Corp. said it was in talks with Australia's Telstra Corp. Ltd. for a joint venture in the telecom business, as confirmed by Ramon Ang, SMC's president and CEO.

"An appropriate disclosure shall be made in the event a definitive agreement is reached and concluded by the company and Telstra," SMC noted in that disclosure. 

The planned joint venture was previously reported to focus on mobile broadband services.

'Encourage foreign capital'

Thorne believed the Philippines should encourage more foreign investments.

"For a country [to be developed], it needs to bring in foreign capital – it makes the environment for indigenous businessmen more competitive," Thorne stressed.

He said the Philippine government has to look at the current provision in the Constitution that limits foreign ownership of companies in the Philippines to 40 percent.

The ambassador shared that in the US, there are no restrictions as far as foreign ownership is concerned, saying: "In fact we encourage foreign investments."

In February, Monchito Ibrahim, deputy executive director of the DOST-Information and Communications Technology Office, had said in a forum in Cebu that such amendment in the Constitution will specifically benefit the telecoms industry.

He said it will create a more "open" environment for investors. He emphasized the telecoms sector needs more players because it is a very capital-intensive industry.

In a previous statement, global credit rater Fitch Ratings said the entry of a third player will intensify industry competition over the longer term, although large cash burn is likely for the new entrant in the initial period because it will face significant capital outlay to build its network in the absence of mandatory infrastructure sharing.

"However, we believe the impact on industry profitability may be greater over the longer term," Fitch said. (FREEMAN)