Telco ‘retreat’

In the metro suburbs where expansion of telecommunication services among competitors remains keen, a reduction in manpower had been apparent leading to an estimated lay off of approximately two-thirds of hired staff, many on contractual project terms.

According to sources, the issues arising from the exposed budget overspending of PLDT in December 2022 affected many of the contractors’ workload. Being the largest telecommunications company in the country with an aggressive capital spending portfolio, the issues arising from the P88-billion capital spending “overrun” had led to a grinding work slowdown.

Fortunately, adds sources, China Telecommunications-backed Dito Telecommunity is moving ahead full steam in the areas where PLDT is slowing down, and preventing an even worse carnage of work layoffs.

China Telecommunications’ Chinese expatriates apparently have been taking a more active hand in directing work on the ground to meet the target commitments agreed on when it won the bidding held by the Philippine government in 2018 to choose the third telco that would challenge the duopoly of PLDT-Smart Telecommunications and Globe Telecommunications.

Barring start-up hiccups compounded by mobility curtailment issues because of the pandemic, Dito is now saying that it has surpassed its 12 million subscribers target in 2022, and is set to reach 28 million subscribers by year’s end on the wings of aggressive infrastructure expansion and marketing campaigns.

Dito is committed to cover at least 84 percent of the population by 2024, its fifth year of operations. Herein will be the bigger challenge since this will mean going into missionary areas that PLDT-Smart and Globe have been avoiding because of low investment returns.

Moving toward consolidation work

Industry observers are seeing PLDT’s capex spending shrink in the coming years, partly to soothe investors who were alarmed by the reported over-budget spending that happened not just in 2022, but even before, and to enter into a consolidation mode whereby the new equipment and infrastructures will be put to operational use.

Incidentally, it is worth noting that PLDT’s reported hyperdrive on investment spending from 2019 to 2022 was a reaction to the expected stiff competition from Dito and fiber internet provider Converge IT Solutions, as well as from pressure by former president Rodrigo Duterte, who was openly critical of both Smart-PLDT and Globe.

As expected, PLDT announced that it would retreat in terms of capital outlay this year, and gave an approximate P79 billion figure, which will be prioritized on projects related to improving customer reach and loyalty both for homes and businesses.

The other half of the maligned duopoly, Globe, is also on a retreat in terms of capital appropriations, having announced a 32-percent reduction this year compared to 2022, which was regarded as one of the highest annual appropriations by the telco to date.

Like PLDT, Globe also foresees capex outlays to shrink further in 2024 as it focuses on operations efficiency to keep net earnings robust. It had also responded aggressively during the pandemic years to the threat posed by a third telco, one that is backed by the Chinese government.

Sea of red

Surprisingly, Dito is planning to spend only P27 billion for capex this year, which is significantly less than half of what any of its two competitors have allocated. With mounting losses, which was attributed to movements in foreign exchange particularly the peso’s weakening against the US dollar and Chinese yuan, Dito is also doing a retreat of sorts, perhaps until the financial market stabilizes.

As of the third quarter of 2022, Dito’s balance sheet was a sea of red, with its deficit already at P28.7 billion, which was ten times higher than end 2021. During the end quarter too, liabilities outclassed assets at P196 billion versus P167.4 billion.

During this period, Dito’s Dennis Uy, who in paper controls 60 percent of the telco, was busy putting on the finishing touches to his sale of various subsidiaries under the Udenna Group, only fueling rumors of him raising funds to shore up Dito’s financing needs.

As expected, China Telecommunications has kept mum on all that’s happening, which only fuels speculation of Dito’s inability to put up a fight against PLDT-Smart and Globe in the coming years, and perhaps go the way of previous third telcos like Sun Cellular and Talk ’N Text Cellular.

A clearer picture will be available soon as Philippine companies will need to submit their yearend financial statements.

Sino fears

China Telecommunications’ presence in the local telecommunications industry is increasingly seen by many as a move by China to strengthen its access of local data, not just of Filipinos but also of the Philippine government.

Especially at a time when Ferdinand R. Marcos Jr.’s government is demonstrating a friendlier posture to the moves by the United States to strengthen its military presence in Southeast Asia, China Telecommunications stake in Dito may gain increasing importance.

Hence, a decreased funding commitment for Dito will be in line with its own concept of consolidation. The third telco will be banking on getting more subscribers that would generate the necessary revenues this year and the next to somehow reduce losses.

Of course, this may be scoffed at as being on the extreme end of paranoia about anything that has to do with China and its seeming ambitions to expand its scope of influence in Southeast Asia and its race against US maneuvers related to protecting Taiwan from any aggression by mainland China.

Everyday brings new developments in the alignment of political and military alliances between and among nations, and while the Philippines has been keeling towards the US at the moment, it is still too early to say where the winds will ultimately bring us.

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