MANILA: Earnings at the two dominant telecom companies in the Philippines dropped sharply in the third quarter, and the intense competition has led their executives to call for an end to a “race to the bottom” on prices.
Market leader PLDT’s core profit, which excludes one-off gains and losses, halved year on year to 4.04 billion pesos ($82 million) in the July-September quarter as service revenue dropped 6% to 38.33 billion pesos. Nine-month core profit was down 20% to 21.74 billion pesos due to financing costs on higher capital expenditures.
“This year has been a particularly challenging period for PLDT as we grappled with both intense price competition and the continuing shift from voice and short messaging services to data demand,” with each factor hurting wireless revenues, Manuel Pangilinan, company chairman and chief executive, said Monday.
At Globe Telecom, which is jointly owned by Ayala Corp. and Singapore Telecommunications (Singtel), core net income fell 29% to 2.91 billion pesos in the third quarter. Expenses rose while service revenue barely budged. Profit for the first three quarters was down 8% to 11.75 billion pesos.
Globe also attributed the earnings drop to competition, which increased when consumer demand shifted to data services from traditional calls and text a few years ago. As a smaller player with fewer traditional telephony assets, Globe adjusted faster in the changing industry and attracted 17 million PLDT subscribers between 2013 and 2016. PLDT tried to defend its shrinking market share with cheaper prices.
PLDT’s bandwidth price fell to 70 pesos per megabyte per second in the third quarter of 2016 from 438 pesos in the first quarter of 2015.
Illustrating the dramatic rate cuts, Globe said 50 pesos (around $1) now buys a gigabyte of data compared with only 300 megabytes in January. The company said this makes the prepaid data rates in the Philippines the cheapest in Asia after India.
“It’s a race to the bottom,” PLDT Executive Vice President Ernesto Alberto said Monday. “We would like to depart from [this] kind of competition because it is not sustainable.”
PLDT has delayed naming a new chief executive until the company clarifies its new business approach early next year. The company projects core net income of 28 billion pesos for all 2016, the lowest in over a decade.
