Smart to downplay 'unli' promo

By Mary Ann Ll. Reyes, The Philippine Star

Posted at Jan 20 2011 07:42 AM | Updated as of Jan 20 2011 07:04 PM

MANILA, Philippines - In a bid to arrest declining yields brought about by unlimited text, voice and data promos, Smart Communications will de-emphasize these unlimited promos in its offerings and will generally offer these merely as "rewards" or 'incentives."

In an interview, Smart marketing head Danilo Mojica said yields in both SMS or text messaging, as well as mobile voice calls, have been on the decline, even as the number of SMS and voice calls have been increasing, due to the increasing popularity of unlimited and bucket pricing promos.

Earlier, Philippine Long Distance Telephone Co. (PLDT) and Smart chairman Manuel V. Pangilinan explained that market conditions are changing. “From 800 to 900 million text messages outbound every day, this has gone up to 1.2 billion. However, yields have declined from 18 centavos per text to 13 centavos,” he noted.

Cellular data/text revenues fell 13% to P31 billion during the third quarter of 2010, despite a 25% increase in text volumes, as they remain under pressure from the proliferation of lower yield offerings, multiple-SIM ownership, and regulator-mandated load validity extensions.

Mojica noted that what is happening in the local telco front is now akin to what is happening in other countries. “The mobile phone industry went straight to maturity due to the unlimited offerings. Even in voice, when it resurged, it went to unlimited, resulting in lower voice yields,” he said.

He also pointed out that the competitive area is no longer among the telcos, but against other means of communication.

Mojica added that the stress in the market is exacerbated by the fact that the industry does not know the appetite of Gokongwei-owned Sun Cellular for unlimited/bucket priced offerings as well as by the speculations regarding the fourth player, Liberty Telecoms of San Miguel Corp. (SMC). Sun Cellular was the first in the industry to introduce the unlimited text offerings, such that for a fixed amount per day for instance, a subscriber can send unlimited numbers of text messages to the same network.

For this year, he expects voice and SMS to experience a low single-digit to even negative growth, while broadband will report double-digit growth rates. “Unfortunately, the growth in broadband, which is still a relatively new offering, will not be enough to compensate for the declines in voice and SMS,” Mojica said.

He, however, emphasized that Smart will not be leaving the competition for unlimited text/voice/data offerings, “but we will no longer be waging a full-scale war.”

“Unlimited offering will become more of an incentive. For instance, it will be bundled with other promos. For certain segments of the market, unlimited offerings may continue, but generally, we will be de-emphasizing it and offer it merely as a reward or incentive,” he said.

Earlier, Globe president and CEO Ernest Cu told The STAR that 2011 will continue to be a tough year for the industry with the escalating price competition.

“Unlimited plans and aggressive bucket offerings will continue to erode yields. The competition for market share will escalate amid the prospects of a fourth player emerging,” he said.

He explained that the company’s financial results during the third quarter of 2010 were reflective of the challenges facing the industry, whereby traffic is growing, but revenues are declining with the market’s increasing preference for unlimited services.

Cu said despite an increase in traffic and overall usage, Globe’s mobile revenues were lower with sustained price pressures resulting from intense competition and subscribers’ increasing preference for lower-yield bucket and unlimited promotions.