COVID – 19 EFFECT TO THE GOING CONCERN OF THE

TELECOMMUNICATION INDUSTRY

“DITO Telecommunity: A Dominating Challenge to

Telecommunications Giants PLDT Inc. and Globe Telecom Inc.”

In Partial Fulfillment of the Requirements in

AINTERN
Section Code: 356

Submitted By:
REGAÑA, EMERY JOY
ANABO, IVAN G.
BSA – 4

Submitted To:
MRS. ANA LAVINA DEPASUPIL
Teacher

July 29, 2021

I. INTRODUCTION

Coronavirus has transformed everyone’s life in some way by making it necessary

to adjust. The one change that has the biggest impact on the telecommunications
industry is the shift from outdoor life to a home-based one including home office and
home schooling. The COVID-19 pandemic more than any other event in human history
has demonstrated the critical importance that telecommunications infrastructure plays
in keeping businesses, governments, and societies connected and running.

The telecommunications industry delivers telephone, television, Internet, and

other services to customers. Providing the primary means of communication to
virtually all businesses, households, and individuals, telecommunications firms supply
an essential service to the economy. In addition to offering traditional services such as
wired phone and cable TV, telecommunications companies also offer services such as
cellular phone, broadband and mobile Internet, and satellite TV, among others.

In contrast to many other industries, the telecommunication sector has been

generally exempted from major COVID-19 related restrictions, such as stay at home
orders and quarantine requirements as it is recognized as an essential service. Thus,
there is a direct relationship between the COVID 19 effect to the going concern of
telecommunication industry. “The pandemic has revealed the gaps in telco services as
Filipinos became more reliant on internet services during the pandemic. Essential
activities in commerce and education, as well as accessing government services like
vaccination and financial assistance require access to telco services. We need foreign
investment to come in to ensure that Filipinos get the services that they need,”
economist and former Finance Secretary Margarito B. Teves said in a statement. The
biggest impact that the COVID-19 crisis has had so far on the telecom industry has been
that the industry lacks telecom infrastructure to provide high quality internet
connection to Filipinos especially from rural areas. People and businesses are shifting to
digital means to manage their work loads, which has led to an unexpected surge in
fixed and mobile network traffic and access demands. With the increasing demand,
slow internet connection was the main problem. Customer complaints raised during the
lockdown due to poor mobile network signal reception and slow internet speeds are
important concerns that the service providers need to carefully examine and review.

The prominent companies providing telecommunication services are Philippine

Long-Distance Telephone (PLDT) and Globe Telecom (Globe). The two aforementioned
companies are the leading players in the industry, causing a duopoly. The Philippines
telecommunications industry has long been dominated by legacy players Philippine
Long-Distance Telephone Company (PLDT) and Globe Telecom. A lack of regulatory
intervention by the Government has led to an extremely saturated market with a
duopoly that does not foster competition. Since the industry is not perfectly competitive
then unfettered market activity cannot be expected to produce outcomes that are always
efficient or that promote consumer welfare. Telecoms in the Philippines has been a
game of two for 30 years, after President Fidel Ramos liberalized the country's telecoms
industry. Smart targets monied millennials. Globe targets those on tighter budgets.

DITO is the governments response to long decade complaints about poor and
inadequate services by PLDT and Globe Telecom. It is envisioned to give the two
telecom the competition that would compel them to improve their services. Dito
Telecommunity Corporation  formerly known as Mindanao Islamic Telephone
Company, Inc. is a telecommunications company in the Philippines which is also
engaged in the business of multimedia and information technology. It is
a consortium of Davao businessman Dennis Uy's Udenna Corporation (through its
subsidiary Dito Holdings Corporation), and Chinese state-owned China
Telecommunications Corporation, a parent company of China Telecom. China-
backed Dito Telecommunity has finally started services, making it the long-awaited
third network provider in the Philippines.

II. BODY
A.) DITO Telecom would greatly affect the operation of PLDT and Globe Telecom

Incumbent players PLDT and Globe Telecom may have to finally deal with a
serious competitor backed by a Chinese telco giant. President Rodrigo Duterte has
fervently wanted to give the country's two-player telecoms industry a shake-up. The
combination of Smart and Globe has been called one of the world's most durable
duopolies. Duterte, known as a populist, threatened the country's telecoms sector with
privatizations in his state of the union address. DITO’s entrance to the Filipino market
held similar ambitions, which is why it is also predicted that market competition in the
country is expected to intensify from 2021. DITO aims to reinvent the Philippine
telecommunications industry by improving the way Filipinos experience connectivity
with secure, fast and high value 4G and 5G technologies. With China Telecom as
partner, DITO has accelerated its network rollout to provide 84% coverage in 5 years
with speeds of 27 Mbps and higher on Year 1 backed by superior customer service that
strengthen “telecommunities”, making the Philippines much more prominent in the
global telecommunications stage. DITO Telecommunity will soon take on Globe
Telecom and PLDT Inc. in bid to grow its market share through a "service to service
fight" when consumers have the power to jump from network to network. DITO aims to
acquire at least 30 percent of the market share, shaking up the duopoly of Globe
Telecom and PLDT Incorporation.

As of December 8, the company already established 1,900 cell towers — a fast

development which should be noted for rolling out cell sites, given the fact that
bureaucracy problems have been haunting the industry for decades. As of today, DITO
is already present in 100 cities and municipalities and available in more than 3,000
stores nationwide, covering 29 million Filipinos. Telecommunications Commission
(NTC) declared DITO Telecommunity Corp. compliant with its requirement to cover
37.03% of the country’s population and provide a minimum average broadband speed
of 27 megabits per second (Mbps) in its first year of service. “DITO passed its
commitments on its first year of technical audit,” the NTC said in a statement on
Monday, citing the results of the technical audit conducted by R.G. Manabat & Co.
According to a copy of its report to the NTC, R.G. Manabat & Co. said DITO’s national
population coverage reached 37.48% while its minimum average broadband speeds
delivered reached 85.9 Mbps and 507.5 Mbps for all 4G and 5G sites, respectively. The
network covered more than 37 million people based on the 2015 national census of
100,983,124. The minimum Mbps per testing point for all sites are: near point – 102.0
Mbps for 4G and 769.1 Mbps for 5G; middle point – 91.2 Mbps for 4G and 437.1 Mbps
for 5G; and far point – 64.4 Mbps for 4G and 316.5 Mbps for 5G. Globe has some 79.7
million subscribers, while Smart has 71.8 million, as of March.

DITO, the newest telco which launched commercially in March, surpassed the 1-

million subscriber mark in June.The entry of DITO Telecommunity as a new mobile
service provider could have a huge impact on PLDT Inc., with a global credit rater
saying as much as 40 percent of brand revenues could be at risk by next year. S&P
Global Ratings said the new telecommunications service provider could shake up the
mobile network scene, and will surely snatch customers away from the current giants.
Telecoms capex in the Philippines is likely to be driven higher in 2021 by regulatory
pressure and looming competition from a new entrant. All players are expected to
upgrade their network capabilities, install fiber-optic and sub-sea systems and cables,
purchase modern networking equipment/storage/servers, and utilize cloud and
cybersecurity services. The biggest purchasers of such equipment would be the two
legacy players and the third telecom. Globe and PLDT`s 2020 CAPEX is above $ 1
billion, and Dito plans to spend $5 billion on the rollout of its services in the next 5
years. All players are price sensitive and do have a bias of purchasing equipment from
China. The market also has a growing segment of smaller broadband providers, such as
Converge ICT, One Sky, Rise Enterprise, InfiniVAN, Now Corporation, PT&T, Planet
Internet, and Radius Telecom. 

B.) PLDT and Globe Telecom would improve its services to compete with the third
telecom

Globe Telecom, Inc. is planning to offer new products and services as it prepares
for increased competition in the telecommunications industry. “Globe is stepping up its
efforts so you will start to see more aggressive offers that will give the people basically
more value for their money,” Globe President and Chief Executive Officer Ernest L. Cu.
Globe initially introduced its 5G services to its home subscribers last July 2019. It
subsequently made this commercially available to mobile clients. PLDT’s wireless arm
Smart Communications also opened its 5G network to its mobile users. Subscribers,
however, must have 5G-ready smartphones to access the network. With massive
investments spent over the last years, current telco players are taking a proactive stance
to maintain their dominance in the market. Efforts from both groups were further
boosted following President Rodrigo Duterte’s mandate to improve their service amid
the pandemic when work-from-home schemes and distance learning are being
implemented to lessen the virus’ blow or face his wrath as the top leader vowed he
would do everything to shut them down.

Earlier in December, PLDT and Globe reported to the Palace their respective
accelerated network rollout. For 2020, Globe deployed 1,300 new cell sites versus the
1,100 in 2019. Over 10,800 sites were also upgraded to 4G/LTE (long-term evolution)
this year, up from 10,135 last year. It also fired up 708 5G sites in 17 Metro Manila cities,
and Mindanao cities. Its main rival PLDT’s Smart Communications, on the other hand,
also stressed in the Palace briefing that it continued to invest in network build up,
noting that it has so far spent P260 billion in the past five years, with P73 billion alone in
2019.It reported to the Malacanang that Smart has over 10,000 cell sites, and 58,538 base
stations across the country. Both Globe and PLDT are looking to bolster their capital
expenditures for 2021, with spending may reach P70 billion and up to P92 billion,
respectively.

PLDT Enterprise is providing businesses with more reliable internet

connectivity with its latest solution called Beyond Fiber. Beyond Fiber seeks to address
connectivity demands of businesses as it would enable them to operate with minimal
service degradation and disruption. With a boosted minimum speed that’s three times
higher than regular fiber connections, PLDT Enterprise said entrepreneurs would get a
more reliable business internet for them to accomplish things they need to do online
regardless which time of the day. The company said Beyond Fiber’s business-grade
fiber and curated digital solutions makes it “the most reliable partner for today’s digital
new normal.”

Meanwhile, Globe Business has entered into partnership with digital

infrastructure company Equinix to provide business clients with a hosted direct private
connectivity to their cloud environments using Globe Premium Cloud Connect. Globe
Business said its collaboration with Equinix will empower companies to utilize
consistent private connectivity without having to shoulder the heavy costs. It said
enterprises with Globe Premium Cloud Connect could easily enlist for multiple
connections and upgrade their bandwidth as they see fit. As of the end of June, Globe
has already surpassed the 600,000 FTTH lines it has laid down in 2020.

Telecommunication giants PLDT Inc. and Globe Telecom Incorporation have

signed interconnection deals with telco newcomer DITO Telecommunity Corporation to
ensure seamless communication of their customers. PLDT said it has entered into an
agreement with DITO for the construction of a transmission facility that would serve as
the point of interconnection for their subscribers. Under the agreement, PLDT will
establish and manage the interconnection facility that will operate as the primary
physical interface for both companies.

III. CONCLUSION
 The new telecom DITO would greatly affect the operation of two telecom giants,
PLDT and Globe Telecom. It was granted the third player status because it was
evaluated as capable of competing with the two other major players. DITO offers a
starting price of 799.00 for 30 Mbps internet which is way cheaper and faster than the 2-
leading telecom. DITO Telecommunity also has completed the interconnection of its
mobile network with major telecommunications providers in the Philippines. This
means subscribers of DITO can send text messages and make voice calls to those using
PLDT Inc.-Smart Communications and Globe Telecom.

On the other hand, Globe and PLDT ramped up efforts to upgrade their
infrastructure and connectivity. Globe initially introduced its 5G services to its home
subscribers last July 2019. It subsequently made this commercially available to mobile
clients. PLDT’s wireless arm Smart Communications also opened its 5G network to its
mobile users. Subscribers, however, must have 5G-ready smartphones to access the
network. Both PLDT and Globe own a significant share on the wireless network
bandwidth frequencies, and with the IP peering agreement, local traffic from any of the
network frequencies can be utilized by consumers to access broadband services. Hence
in the demand side, their decision becomes much simpler since coverage is not an issue
anymore. However, DITO will need to pay rents to the duopoly in order to utilize the
specific frequencies for themselves: this is where the specifics of the unbundling policy
come in; how tight regulations would be, or if deregulation after the unbundling policy
will actually increase welfare. As long as the unbundling policy will allow new firms to
enter the market.
The country’s call for a third telecoms player stems from low competition and
underinvestment in the industry, beginning with the more than 65-year monopoly held
by PLDT. The stipulations required of the third provider are expected to see all players
increase coverage rates, improve mobile internet speeds and offer more attractive
packages. Regulatory bodies are tasked with redistributing spectrum from the two
incumbents so that DITO Telecommunity will be able to compete. “Our role is to ensure
that the third player can offer its services nationwide. Thus, we are considering a better
way to allocate the spectrum, especially the lower band, which the new player can use
for coverage,” Edgardo V Cabarios, deputy commissioner of the NTC, told OBG. “We
are also considering measures to minimize reluctance among the incumbents.”