Telcos expect challenging 2009

BusinessWorld

Posted at Feb 05 2009 01:55 AM | Updated as of Feb 05 2009 09:55 AM

Mobile telephone companies expect a challenging 2009 as the slowing global economy continues to dampen consumer spending.

"We are looking at controlling our operating costs much better since we are very sensitive to the growth of the domestic economy," Globe Telecom, Inc. President and Chief Executive Officer Gerardo C. Ablaza, Jr. said on the sidelines of a briefing yesterday.

The Philippines is the unofficial text capital of the world, with Filipinos sending about a billion text messages daily, more than the combined messages sent in the US and Europe.

Ayala-led Globe earlier said it would cut capital spending by about a fifth this year after posting a 15% decrease in its 2008 net income to P11.27 billion from a year earlier.

Ramon I. Isberto, spokesman of rival Smart Communications, Inc., said they were counting on services for the low-end market, such as unlimited calls and text messages at low costs for a limited period, for profits.

"Budget products really sell, and we expect this to continue in 2009. We really try to reach the low-income market, and be cost-efficient as much as possible," he said in an interview.

Mr. Isberto also said Smart’s capital spending, estimated at P28 billion this year, could be adjusted depending on the market.

"It’s going to be a difficult year, but we will try to maintain our core income from last year and try to improve from there," he added.

John V. Rojo, Corporate Communications head of Lopez-led Bayan Telecommuncations, Inc., said they remained "cautiously optimistic."

"We see relatively modest growth for the year since it’s going to be more challenging," he said in a phone interview.

Meanwhile, Edgardo V. Cabarrios, director of the NTC common carriers and authorization division, said this year might be more difficult for mobile telephone companies if the income of Filipinos continues to shrink because of the global downturn.

"If their disposable income is small, and if food prices again rise, Filipinos will likely avoid spending on telecommunication services," he pointed out.

Analyst Astro del Castillo, managing director of brokerage First Grade Holdings, Inc., said companies might engage in "strategic pricing" — lowering prices to make their products more attractive.

And their profits might decline, but not necessarily to record lows. "The global economic crisis notwithstanding, I still expect us to remain the text capital because we are an archipelago and we have many relatives outside our country, making communication more vital," Mr. del Castillo said.

Mr. Ablaza shared the view, noting that telecommunications "may be one of the last to go in a crunch." — Jose Bimbo K. Santos