Fitch Solutions sees higher investment risks in telco sector

MANILA, Philippines — London-based think tank Fitch Solutions expects higher investment risks in the country’s telecommunications industry following the recent shutdown of ABS-CBN and Sky Direct, which it said highlights the politicization of telecoms services in the Philippines.

Fitch Solutions said the termination of services of ABS-CBN and Sky Direct, coupled with the country’s fluid and inefficient telecoms regulatory regime, which has been a deterrent to foreign investment, led to a downward revision of the country’s telecoms industry risk reward score to 46.1 points out of a potential 100.

A lower score indicates higher risks.

“Given the politicization of media services and the challenging outlook of the Philippines’ telecoms sector, we have revised downward the country’s telecoms industry risk score, which now stands at 46.1 points out of a possible 100, down from 57.5 in our previous quarter’s update,” it said in a report yesterday.

“The regulator’s apparent ability to be influenced by the government continues to be a key impediment to foreign investor sentiment, and has also made the telecoms landscape difficult for both new entrants and existing players,” Fitch Solutions said.

ABS-CBN went off the air on May 5 in compliance with a cease and desist order issued by the National Telecommunications Commission (NTC) following the expiration of the network’s franchise.

Last June 30, the NTC also ordered ABS-CBN’s Sky Cable Corp. to cease and desist operating its direct broadcast satellite service.

The order covers Sky Direct, which is the direct-to-home satellite service of Sky Cable.

“While the Filipino government has begun the process of reviewing a new congressional franchise for ABS-CBN, the outcome of the review is uncertain,” Fitch Solutions said.

“The forceful termination of ABS-CBN and Sky’s broadcasts are highly politicized, and clearly linked to President Rodrigo Duterte’s opposition toward ABS-CBN,” it said.

According to Fitch Solutions, the slow formulation of the country’s tower sharing policy, which was released in a draft version in May following a protracted period of discussions and negotiations, also highlights the slow pace of instituting reforms in the industry.