Telcos seen to hike capex by 20-25 pct next year as 'healthier competition' expected: Fitch

ABS-CBN News

Posted at Nov 18 2020 12:15 PM

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MANILA - The Philippine internet economy will see "healthier competition" next year as telco firms are expected to increase spending by 20 to 25 percent and new players are to enter the market, an analyst at Fitch Ratings told ANC's Market Edge on Wednesday.

"We are expecting capex (capital expenditure of telco firms) to increase by 20 to 25 percent next year," said Janice Chong, director of Fitch Ratings Singapore Pte Ltd.

Chong said the delay in network roll out this year will accelerate the spending of telco firms in the coming quarters to address pent-up demand in telecommunications services.

She also noted that the push from President Rodrigo Duterte to improve internet and mobile network will "keep telcos on their toes", as well as looming competition with the entry of DITO Telecommunity, NOW Telecom and RED Broadband next year.

"Next year, we are going to see healthier competition from multiple players not only in the mobile space but in fiber broadband space as well. And what this means for the consumers is you can look forward to more options, more service providers at competitive prices," Chong added.

The COVID-19 pandemic has slowed the expansion of telco infrastructures and also boosted data consumption in light of the stay-at-home lifestyle.

Existing telcos would likely focus on providing internet in the regions and provinces next year to combat the limited connectivity to niche markets by the new entrants, Chong said.

Telco firms will also look at the home broadband space over the next three years, given the "great growth potential for all players" in this underserved market.

RED Broadband has an edge, Chong added, as they "bundle" pay TV with home fiber broadband, which is where most of the demand is.

The Philippines has been "fairly early" in the 5G rollout in Southeast Asia, but the reach is expected to be limited or targeted depending on the roll out of telco infrastructures and the affordability of price plans to meet rising demand.

Chong said PLDT will fare better than the rest with the 5G rollout as they continue to be aggressive in investments.

But she noted that even with its BBB stable rating -- higher than BBB- rating for Globe -- PLDT has less room to maneuver in order to prevent a negative rating downgrade if cash flows are not managed properly.