BMI's Executive Summary

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The Sector At A Glance

Key Insights On The Telecomunications sector of Philippines

A dearth of competition in the Philippine telecommunications market suggests a sustained period of solid but unspectacular growth. In the country’s challenging wireline sector, we suggest minimal growth, although BMI is more confident on the potential for faster growth in the Philippines’ mobile and data services industries.

A poor infrastructure and a lack of government investment are the factors most responsible for a stagnant fixed-line sector. Broadband substitution and the decline in the volume of ILD inbound calls have been the results, with wireless messaging, VoIP and high-speed data services limiting the need for ILD telephony. One only has to look at PLDT’s 21% y-o-y decline in its ILD revenues over the first nine months of 2006, and the operator’s 21% y-o-y rise in data revenues, to get an understanding for the current consumer trends.

Compared to the high-growth markets of Indonesia, Vietnam and Pakistan mobile growth in the Philippines is slow. Still waiting for end of year figures, we project that there will have been just over 40mn wireless subscribers in the Philippines by the end of 2006. This still represents penetration of less than 50% leaving potential for rapid growth. However, BMI feels this growth will be solid instead, with an annual average y-o-y rise of just 8% over the next five years. It is the consumer broadband market that shows the greatest potential, with market leader PLDT on approximately 300,000 subscribers. Meanwhile, its rival Globe’s broadband customer base had risen by 149% y-o-y by the end of September 2006.

Looking at incumbent operator PLDT’s capex plan for 2007 clearly shows the climate of the Philippine market. The operator has stopped looking towards the wireline telecoms market, and instead is investing in the number of its wireless broadband cell sites, 3G mobile network rollout and its call-centre business. It is this, as well as its outsourcing business that is becoming an increasingly large revenue earner for PLDT. As much as 50% of ePLDT’s business comes from call-centres, with a further 25% from outsourcing.

The Philippines is in 12th position in our Business Environment Rankings, only ahead of Thailand and Vietnam. PLDT and Globe dominate the telecommunications industry, resulting in a lack of competition and inward investment. However, Hong Kong conglomerate First Pacific and Japan’s NTT are likely to acquire the government’s 7% of its stake in PLDT that it is selling. It is probable that any investment will go towards the real industry engine of growth – broadband – and the wireless sector, where with a penetration rate of under 50%, there is still leverage for growth. An operator offering high-speed wireless data services, such as PLDT’s cellular unit Smart Communications, should be in a good position to succeed.

Contents

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Chapter 1 - Executive Summary

Chapter 2 - Business Environment

Asia

Philippines

Philippines Business Environment Industry SWOT

Chapter 3 - Industry Forecast Scenario

Fixed-Line

Table: Philippines Telecoms Sector – Fixed-Lines – Historical Data & Forecasts

Mobile

Table: Philippines Telecoms Sector – Mobiles – Historical Data & Forecasts

Internet

Table: Philippines Telecoms Sector – Internet – Historical Data & Forecasts

Chapter 4 - Macroeconomic Forecast Scenario

Table: Philippines: Macroeconomic Data And Forecasts

Chapter 5 - Country Snapshot: Singapore Demographic Data

Section 1: Population:

Table: Demographic Indicators (2005)

Table: Rural/Urban Breakdown

Section 2: Education & Healthcare

Table: Education

Table: Healthcare: Vital Statistics

Table: Healthcare: Expenditure

Section 3: Labour Market And Spending Power

Table: Employment Indicators

Table: Consumption and Stratification

Chapter 6 - Competitive Landscape

Market Structure

Competitor Analysis

Table: Key Players – Philippines Telecoms Sector

Table: Philippines Selected Operators Financial Indicators

Key Players

Fixed-Line

Table: Regional Fixed-Line Penetration Overview

Mobile

Table: Regional Mobile Penetration Overview

Internet

Table: Regional Internet Penetration Overview

Chapter 7 - Market Data Analysis

Fixed Line

Table: Philippine Local Market, 2005

Table: PLDT Fixed-Line Service Revenue Composition, June 2006 (PHPmn)

Table: PLDT Broadband Subscribers ('000)

Mobile

Table: Philippines Wireless Market, H106

Table: Leading Mobile Operators Blended ARPU, 2005-2006

3G

Industry Developments

Chapter 8 - Company Profiles

Regional Case Study – Motorola

Table: Motorola Net Sales by Region (US$mn)

Table: Motorola Market Sales by Locality of End Customer

Table: Leading Mobile Phone Handset Sales (mn) – Q306

Philippine Long Distance Telephone Company (PLDT)

Digital Telecommunications Philippines Inc

Globe Telecom

Smart Communications

Chapter 9 - BMI Forecast Modelling

How we generate our industry forecasts

Telecommunications Industry

Sources

Chapter 10 - Appendix: Regional Demographic Data

Table- Manufacturing Wages (ave per annum), US$

Table - Population

Household Spending Per Capita, US$

Private Consumption Per Capita, US$ PPP

Market Size, GDP, US$bn

Competitive Landscape for Asia Telecommunications Reports: Sample of Companies Ranked

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Commentary on key operators highlighting ownership structures, latest available revenue figures, market share analysis and ARPU counts. BMI forecasts for all headline macroeconomic indicators, including real GDP growth, inflation, fiscal balance, trade balance, current account and external debt. Company SWOTS Covering all leading telecommunications operators and manufacturers operating in each market, including competitive intelligence on geographic presence and competitive positioning against local companies; local market share; leading products, services and technologies; foreign direct investments, projects, merger and acquisition strategies.

Network of Asian Telecommunications Sources

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BMI's Asian Telecommunications Reports are based on an extensive network of multilateral organisations, government departments, telecommunications industry associations, chambers of commerce and company reports. Information sources include: