The Philippine Chamber of Telecommunication Operators (PCTO) has acknowledged the in-depth and realistic findings of the new study from the academic sector about the Philippine telecommunications industry, said its chairperson Eric Delos Reyes.
Entitled “Assessment of the Structure, Conduct, and Performance of the Philippine Telecommunications Industry” written by University of the Philippines (UP) Professor Emeritus Dr. Epictetus Patalinghug, the study described the local telco market as highly concentrated as well as highlighted the barriers to entry of a third player.
Delos Reyes said PCTO welcomes the study as it is the only paper that captured the real state of the industry. “The study anchored on economic principles and covered all aspects of the industry which can help our legislators, regulator and policy makers in improving the state of Philippine telecommunications,” Delos Reyes revealed.
These barriers to entry, according to Patalinghug, include the need for a congressional franchise, spectrum availability, huge capital requirements, and the various licenses and permits from the different sectors of the government.
Delos Reyes disclosed that the said entry barriers maybe the reasons why the Philippines has not seen new major telecoms companies investing in the country in the last 15 years or so while others have tried but did not stay long. “From the business perspective, putting up a huge amount of money late in the game may not be viable considering that there is no immediate profitability dueto the huge capital expenditure (capex) needed to build up the infrastructure and the high cost to maintain the operation annually in order to be competitive against incumbent players,” he said.In addition, Delos Reyes pointed out that the cost of acquiring new subscribers, as a late entrant, traditionally is more expensive.
Earlier, Patalinghug said during a forum at the Asian Institute of Management that a third player may have a difficult time attaining financial viability in the short run due to its late-mover disadvantage and the need to penetrate undeveloped areas where deployment cost is higher than the almost saturated urban markets.
“The massive capital requirements to bridge the gap that the two existing telcos have already built over the last few decades make the market not viable for the entry of a new player,” Patalinghug said. ”Our analysis is that a third player can enter the market if it is cost insensitive for the next ten to fifteen years. No private firm can afford that,” he added.