A STRATEGIC MANAGEMENT PLAN FOR GLOBE TELECOM INC.

BAGUIO, SOPHIE ALEXANDRA

MACAPAGAL, JULIANNE
MARQUEZ, YRA DANIELA G.
RODRIGUEZ, VICTORIA R.

San Beda University

College of Arts and Sciences
Department of Financial Management

Prof. Catherine M. Fernandes

June 8, 2021
Description of the Industry

Philippines Telecommunications Industry Profile

Established in 1979, the NTC is the country’s telecoms regulator. Its core functions include

issuing licenses and permits for telecommunications services, telecoms law enforcement, radio

frequency spectrum allocation and undertaking studies on industry requirements. The Department

of Information and Communications Technology (DICT), meanwhile, oversees the broader ICT

industry, after former president Benigno Aquino III split the functions of the Department of

Transportation and Communications to create a standalone ICT department in May 2016.

As of October 2016, two large companies - the Philippine Long Distance Telephone

Company (PLDT) and Globe Telecom, Inc. (Globe) are leading in the local telecommunications

market. Both companies provide mobile and landline telephone services as well as Internet

broadband. Each holds a public utility franchise granted by Congress in pursuant to Public Utilities

Act. Their foreign partners have invested substantial equity in the sector.

The increased competition, consumer choice and the rapid technological change

contributed to the improvement of the telecommunication infrastructure. Landlines were

outnumbered by mobile phones and Filipinos now have twenty times as many mobile subscriptions

as landlines. The Philippines, known as the text message capital of the world, is the world leader in

Short Messaging Service (SMS) with almost one billion daily messages.
Highlights or Contributions

Economic Impact of Telecommunications and Broadband in The Philippines

According to 2017 Annual Survey of Philippine Business Industry (ASPBI), the total

income generated by the Information and Communication sector for establishments with Total

Employment of 20 and over amounted to PHP585.9 billion in 2017, higher by 1.5 percent from the

PHP577.1 billion income in 2016. Wireless telecommunications activities industry generates the

biggest share in income and expense. Wireless telecommunications activities had the biggest share

to total income, amounting to PHP233.9 billion or 39.9 percent while wired telecommunications

activities ranked third with an income of PHP104.4 billion or 17.8 percent. Wireless

telecommunications activities which was the biggest income generator, also had the biggest

proportion to total expense worth PHP191.8 billion or 40.8 percent. Wired telecommunications

activities ranked third with expenses amounting to PHP71.8 billion or 15.3 percent, respectively.

On a final note, the Philippine Statistical Authority (PSA) reports that in Q3 2017, the

communications sector has contributed PhP275,665 million (or 2.43%) to the country’s gross

domestic product of PhP11,335,786 million of the same period and as of July 2017, the

information and communications sector employs a total of 408,000 which represents almost 1% of

the total employment for the said period (40,170,000).

Technological Development Affecting the Industry

The Philippines’ telecommunications industry has expended quickly since its progression

during the 1980s, when consumers hung tight to 10 years for a landline connection and service

quality which was generally poor. Albeit the market was controlled for almost 65 years by a private
monopoly, liberation activities dispatched in 1987 prompted the launch of the market to new

rivalry. This has disintegrated prevailing administrator PLDT's piece of the overall industry,

especially during the previous decade, as consumer inclinations have progressively moved towards

portable broadband and computerized administrations, upsetting conventional voice and SMS

streams

Today the Philippines has one of the fastest-developing telecommunications markets in

Asia, upheld by the rapidly growing utilization of data services by an increasingly tech-savvy

population. As indicated by the most recent figures from the National Telecommunications

Commission (NTC), the total number of mobile users in the country rose from 6.45M in 2000 to

130.32M at the end of 2014, and GSMA Intelligence reported in December 2014 that the number

of unique mobile subscribers grew by 6% between 2012 and 2014. A large portion of the populace

uses to mobile services, according to the company’s Country Overview Philippines: Growth

Through Innovation” report, and in October 2016 professional services firm EY reported that

mobile penetration in the Philippines stood at 111%.

GSMA Intelligence reports that the Philippine market is unique in the sense that its young,

literate and largely English-speaking 103m-strong population is particularly engaged. The country

has been called the texting and social media capital of the world, and the vast majority of new

internet users are coming online via mobile phones.

The Philippines is also one of the fastest-growing smartphone markets in South-east Asia,

according to a June 2016 report published by the International Data Corporation (IDC). The IDC’s

Asia/Pacific Quarterly Mobile Phone Tracker found that 3.5m smartphones were shipped to the
Philippines during the first quarter of 2016, a 20% year-on-year (y-o-y) increase, with the market

offering significant future growth potential due to relatively low smartphone penetration, which

stood at 30% as of 2015, the IDC’s latest figures.

Last year, Globe Telecom, the largest mobile network operator in the Philippines and one of

the largest fixed-line and broadband networks, launched 5G technology in the Philippines. The

telco aims to offer high-speed internet to tens of thousands of Filipinos in key urban areas in the

country.

Globe Telecom’s efforts to introduce 5G technology has pushed the Philippines to the

forefront making it the first country in Southeast Asia to implement the rollout—thus leading the

5G race in the region. In fact, the move seems logical because of the country’s urgent need of an

overhaul to make advancements on this front. Certainly, 5G is recognized as the technology of the

future. While the hype around 5G largely points to improved internet speed, the technology’s

greater bandwidth will allow a large number of devices to be connected to the network compared

to previous scenarios. The fastest 5G networks are expected to be at least 10 times faster than 4G

LTE, according to wireless industry trade group GSMA. Even though 5G speed is expected to be

super-fast, equivalent to downloading a movie within seconds, much of it will depend on external

factors such as location and network traffic. Although it is quite evident that 5G has the potential to

solve the problem of internet speed in the Philippines, its high functionality will depend on

scalability.

Characteristics of the Firm in the Industry

Telecommunications Market Size

 The Philippine telecommunications industry is continuously developing over the years. The

sector used to be a duopoly exclusively led by two telecommunications networks in the past.

However, the sector have rapidly produced new players, especially in the internet services

industry, resulting in an increasing number of internet service providers. Furthermore, the

continuing appetite of many Filipinos in communicating through their mobile phones, accessing

information through the internet, streaming and downloading videos saw the rapidly

growing mobile phone internet user penetration in the Philippines yearly.

The surge of digital users in the Philippines has been on the rise in recent years. Time spent

on the internet by Filipinos, which was the highest among other Asian countries, led to more

demands for improving fixed broadband services from the country's internet service providers

despite its growth in numbers. The lack of dependable broadband connections in the Philippines

able to provide higher internet speed, halts better user experience, resulting to one of the lowest

fixed subscription growths among the Asia-Pacific region in 2018.

Table No. 1
Revenue Acoomplishment for 2018

TARGET 4,558,538.000.00
ACTUAL 6,446,292,862.00
ACCOMPLISHMENT RATE 141.41%
EXCESS 3,785,421,907.49

Telecommunication Market Share

 In a recent finding, the numbers of installed telephone lines in the Philippines have been

decreasing. The shift to mobile-based access of communicating has seen a rapid increase of mobile

phone subscriptions in the country. Mobile network providers in the Philippines supply mobile

phone devices with broadband connections in a pre-paid or post-paid internet package plans,

allowing consumers to access to the internet at any given time and place.

While the mobile segment is dominating the market, the fixed line segment remained

underdeveloped. Telecommunications network must invest in modernizing fixed infrastructures to

be able to stay competitive. Hence, the importance of fiber infrastructures in all areas of the

country should be available. Of the countries in the Asia-Pacific region, the Philippine ranked one

of the lowest in fiber to the home subscriptions in 2018.

Table No. 2

Mobile Prepaid Market Share

SERVICE PROVIDER 2016 2017 2018

SMART/PLDT 49.5% 48.5% 45.3%
GLOBE/BAYANTEL 49.7% 50.6% 54.7%
ABS-CBN 0.8% 0.9% 0.0%
TOTAL 100% 100% 100%

Table No. 3
Mobile Post-paid Market Share
SERVICE PROVIDER 2016 2017 2018
SMART/PLDT 52.7% 50.0% 48.0%

GLOBE/BAYANTEL 46.7% 49.3% 52.0%

ABS-CBN 0.6% 0.7% 0.0%

TOTAL 100% 100% 100%

Table No. 4
Broadband Fixed Line Market Share
SERVICE PROVIDER 2016 2017 2018
SMART/PLDT 34.1% 26.5% 17.8%
GLOBE/BAYANTEL 65.9% 73.5% 82.2%
TOTAL 100% 100% 100%

Table No. 5
MOBILE POST-PAID MARKET SHARE
SERVICE PROVIDER 2016 2017 2018
SMART/PLDT 66.0% 68.3% 66.7%
GLOBE/BAYANTEL 27.8% 25.7% 23.2%
OTHERS (PAPTECO/VAS 6.2% 6.0% 10.1%
PROVIDERS)
TOTAL 100% 100% 100%

Telecommunication Employment

According to the Philippine Statistics Authority, Telecommunications industry generates the

highest employment compared to land and air transport industry. Employment for the sector

reached a total of 149,657 in 2009. Almost all or 99.3 percent were paid employees (148,553).

Across region, NCR was the top employer with more than two-thirds of total employment or

104,230 employees. Central Visayas was a distant second with 8,458 employees (5.7%) followed

by CALABARZON with 6,804 employees (4.5%). Cagayan Valley region employed the least with

only 141 employees (0.1%).

Table No. 6

Pest Analysis for Philippine Telecommunication Industry

Components Opportunities Threats

1. Build, build, build 1. Political Instability in
program the Philippines
2. Government and Private 2. Regulatory Practices
Institutions Going Online 3. New Government
Political, Governmental, 3. High Barriers to Entry 4. Various Threats by
& Legal 4. Non-Government Rebels, Terrorist and
Organization, Civil Society Unlawful Groups
& Protest Groups 5. Red Tapes and
5. Government’s free Wi-Fi Constantly Changing
Project Government Laws
1. Growth of Business in the
Philippines Specifically the
BPO Industry
1. Inflation Rate
2. Major Contributor in
2. Interconnection Rate
economic growth
Economic and 3. Economic performance
3. High Demand of Internet
Environmental 4. Foreign Exchange
Connectivity
Factors
4. Reducing Carbon
5. Natural Calamities
Footprint
5. Work from Home and
Online Learning Schemes
1. Customer Preference
2. Growth and Faster
1. Population Growth
Internet Speed of other
2. Growth of E-Commerce
Asian Countries
in the Philippines
Compared to the
3. Philippines as “The Text
Philippines
Socio-cultural Capital of the World”
3. Lack of connectivity in
4. Growth of the Filipino
rural areas
OFW Population
4. Product Risk Promotion
5. Increase popularity of
through diverse audiences
content streaming services
5. Traditional influence of
the community
 1. New Smart Phones and
Mobile Internet Gadgets
2. 4G, LTE and 5G
Technologies
3. Over-the-top
Technological
Technologies
4. Increase of usage in
Social Media
5. Online Banking and
Payment Services
1. Cheap Online Voice
and Data Messaging
Applications
2. Cyberattacks from
Hackers
3. Technological
Readiness
4. Internet Traffic
5. Higher Cost of
Technology

Political, Governmental, and Legal Factors

Opportunities

Build Build Build Program

According to a study released by the Philippine Institute for Development Studies, it is

noted that internet connectivity in the Philippines has improved. ICT-related projects that have

been rolled out include the Luzon Bypass Infrastructure Project and the National Broadband

Program. The former established a high-speed information highway meant to improve the

speed, affordability and accessibility of broadband internet. On the other hand, the National

Broadband Program installed fiber optic cable and wireless systems.

Government and Private Institutions Going Online

Nowadays, various Philippine government and private institutions are utilizing the

internet as a medium to serve their various clients and customers. The Philippine government is

even encouraging its various public departments to enhance its services by tapping the internet
 as a medium to enhance efficiency and to eradicate red tapes and corruption. Last march 2012

the Philippine government established a new Department named Department of Information and

Communications Technology (ICT) to spearhead the country’s policies and regulations in

information and communications technology.

High Barriers to Entry

Market entry for a new telecommunication company would be difficult due to high capital

costs needed to build a network, as well as bureaucratic red tape. The telecommunication

industry is difficult to penetrate due to the fact that barriers to entry are very expensive to

overcome and because deployment of networks are very challenging due to local government

issues. With that being said, it would be difficult for another company to enter in the industry

which results to less competitors in the market.

Non-Government Organization, Civil Society & Protest Groups

The Philippines has a vibrant civil society community and the telecom companies should

build bridges and form relationships with them and seek out areas of co-operations. Civil

society groups are influential not only in policy making but also in building a society wide

narrative.

Government’s free Wi-Fi Project

According to the Department of Information and Communications Technology, Free Wi-

Fi for All continues to accelerate the Philippine government’s efforts in enhancing Internet

accessibility for Filipinos so that economic, social, and educational opportunities will thrive,
 and, in turn, bring the Philippines closer to the forefront of an ICT-enabled world. With this

project, telecom companies have the opportunity to partner up with different LGUs to provide

free Wi-Fi.

Threats

Political instability in the Philippines

There is a growing political instability in the Philippines stemming from opposition to the

government’s domestic and foreign policy agenda. It is said in a survey of New York-based

think tank that there is a “moderate” likelihood for the Philippines to suffer from political

instability.

Regulatory Practices

The national telecommunication commission is the one responsible for telecommunication

policies in the Philippines. Changes in their policies may affect the telecommunication

industries like Globe. RA 7925, otherwise known as the “Public Telecommunication Policy”

likewise recognizes the vital role of telecommunication to national development and security,

and under section 5 thereof declares that the “National Telecommunication Commission (NTC)

shall be the principal administrator of this Act and as such shall take the necessary measures to

implement the policies and objectives set forth in this Act”

New Government

With the changes in new government, there could also be changes in the

telecommunication industries. One of the major changes is the entry of a new players in the

telecommunications market. Pres. Rodrigo Duterte directed the NTC and the DICT to ensure the

entry of a New Major Player OIMP in the telecommunications industry that will provide the

best possible services at reasonably accessible prices.

Various Threats by Rebels, Terrorist and Unlawful Groups

Due to the wide, scattered and sometimes remote locations of telecommunication

equipment and cell sites of telecommunication companies in the Philippines, they are prone to

attacks from various rebels, terrorist and unlawful groups which tend to extort and sometimes

destroy the telecommunication player’s equipment if they don’t pay up. This makes the

telecommunication players in the Philippines prone to risk that comes with political unrest most

especially in remote provinces in the country.

Red Tapes and Constantly Changing Government Laws

The telecommunication industry in the Philippines, most especially the top players, are

prone to risks from red tapes and various local government laws being enacted by different

municipalities in the Philippines against the telecommunication players. The top

 telecommunication players voiced this concern during the senate hearings against

telecommunication players in the Philippines due to slow internet speed last January 2015.

During the said hearings, one of the top management from Globe Telecoms voiced this

concern stating that the process of simply getting permits for erecting towers alone takes too

long. As per his statement, simply putting up a tower, not even commissioning the materials

needed for a cell site to work and use frequencies, needed 10 permits before commencing the

actual construction. This makes putting up just one tower, with no working materials, at least 6

months.

Economic and Environmental Factors

Opportunities

Growth of Business in the Philippines Specifically the BPO Industry

As the Philippine GDP continues to rise, so does businesses in the country. One of the key

contributor to this grow is the country’s Business Process Outsourcing (BPO) industry. This

industry alone posted a 26% growth in 2014 generating $9 billion in export earnings for the

Philippines. The BPO industry also has a 5% share in the Philippines GDP.

Major Contributor in Economic Growth

 According to Bernardo Villegas, a leading economist, the country’s strong

telecommunications sector is a key infrastructure industry that will boost the Philippines’

economic growth in the coming years. The Philippine Statistical Authority (PSA) reports that in

Q3 2017, the communications sector has contributed PhP275,665 million (or 2.43%) to the

country’s gross domestic product of PhP11,335,786 million of the same period.

High Demand of Internet Connectivity

As the lockdowns restrict business operations and limit the movement of people, internet

connectivity has never been more urgent to enable digital transformation as the country adopts

to new landscapes brought about by the pandemic. The telecommunication sector needs

development of several infrastructure and implement technical works to keep up with the

demand. This can be seen as an opportunity to rise above the situation and provide top quality

internet service.

Reducing Carbon Footprint

In a GSMA report, it showed that the use of mobile technology enabled a global reduction

in Greenhouse Gas (GHG) emissions of around 2,135 million tonnes carbon dioxide (CO2e) in

2018. The emissions savings were almost ten times greater than the global carbon footprint of

the mobile industry itself. The impact of mobile technologies in response to climate change,

encourages innovation and hastens the digital transformation of industries and nations.

Work from Home and Online Learning Schemes

 In times of crisis such as the COVID-19 Pandemic, the telecom industry plays an

important role in ensuring business continuity and household sustainability as people’s

dependency for a reliable broadband connectivity becomes more crucial. Internet connectivity

will serve as one of the main foundations in supporting the overall digital infrastructure

development in the Philippines. According to a data collected by S&P Global Market

Intelligence, the internet service providers in the Philippines experienced a surge in fixed

broadband subscriptions and revenues amid the coronavirus pandemic.

Threats

Inflation Rate

Despite the downside risk of recent inflation in the Philippines, the International Monetary

Fund (IMF) project a 6.6 percent economic growth outlook by 2019. On the other hand, the

inflation forecast is estimated to reduce by 4 percent amid 6.7 percent current inflation rate.

Inflation greatly affects the prices of commodities and services in the country. (Philippine

Information Policy)

Interconnection Rate

The government has sent lower charges on text or short messaging services and calls

between telecommunication companies. The interconnection rates will be reduced from 2.50

pesos to 0.50 pesos per minute for voice and from 0.15 pesos to 0.05 pesos per SMS for text
 messaging services. Lower interconnection rates could result in lower operation costs for

telecommunication companies, making the business environment more attractive to a third

telecommunications player. (CNN Philippines)

Economic performance

In 2017, the Philippines was among the top three growth performers in the region. Only

Vietnam and China did better. The Philippine economy grew from 6.9% year on year on 2016 to

6.7% in 2017. The country’s medium term growth outlook remains positive.

Foreign Exchange Factors

The Philippine Peso continues to remain stable staying at the range of 43 to 45.50 peso

against the US dollar in 2014 despite increasing volatility of currencies abroad due to a myriad

of factors such as slowing economies of 1st world countries, low interest rate regimes of some

countries and quantitative easing of big economies such as Japan, EU and United States. One

main factor that contributes to the stability of the Philippine Peso is the Banko Sentral ng

Pilipinas (BSP) high Gross International Reserve (GIR) which stands at around $86.16 billion in

September 2019. This level of GIR can cover roughly around 7.5 months’ worth of the country’s

total imports.

Natural Calamities
 The Philippines is prone to strong typhoons most especially now that the issue on climate

change predicts stronger typhoons in the coming years and the country is within the pacific rim

of fire which greatly increases the possibility of earthquakes and volcanic disasters to occur. The

said disasters might greatly affect the telecommunication companies if they occur as the

infrastructures and equipment of the industry players are scattered all around the country.

Destruction and impairment of the said materials might add up to cost of doing business for the

telecommunications industry.

Socio-cultural and Demographical Factors

Opportunities

Population Growth

The Philippines is one of the countries with the biggest population in the world. In 2014,

the country ranked 12th in the world, the 7th in Asia and 2nd in ASEAN.19 The Philippine

census forecasted that by year 2020, the country’s population will be around 111 million giving

it an annual growth rate of 1.64% from 2015 to 2020. Furthermore, it is expected that by the

year 2045, the country’s population will be around 142 million. Also in 2010, only around 6.7%

of the Philippines’ total population was aged 60 years old and above. The said age group is

forecasted to make up roughly around 10% of the country’s population by 2025. Conversely,

children with an age of 14 years old and below are forecasted to fall from one third of the total

population in 2010 to one fifth by 2045.

Growth of E-Commerce in the Philippines

With the growth of internet and social media usage in the Philippines, the country’s e-

commerce market pocketed around $1 billion in total sales in 2014 and the broader internet

market, which includes internet usage and other businesses that uses the internet, stands at

Php1.4 trillion in 2014 or around 13% of the country’s GDP. The Philippine e-commerce sales

revenues is expected to double in value to $2 billion by 2015 and is further expected to grow to

$9.1billion by 2018.

Philippines as “The Text Capital of the World”

Mobile phones, being the most common personal accessories among many Filipinos, have

a deeper market penetration than landline phones. Due to the highly social nature of Philippine

culture and the affordability of SMS compared to voice calls, SMS usage shot up, and texting

quickly became a popular tool for Filipinos to keep in touch with their friends and loved ones.

Growth of the Filipino OFW Population

The number of Filipinos going abroad has been constantly increasing in the past 30 years.

The said numbers grew from around 36,000 in 1975 to 2.2 million in 2019. With OFWs leaving

their respective homes in seeking greener pasture abroad, one of their most important needs is

communication with loved ones. The popularity of social media applications, over-the-top
 services, and video chat services enable OFWs to keep in touch with their families in real-time.

Wireless telecommunications service providers also offer electronic remittance services for

easier and faster sending of money at home. This means that with growing OFW population, the

need for telecommunication services will also grow.

Threats

Customer Preference

Telecommunication companies should have the ability to recognize and quickly respond

to changes in customer preferences by upgrading existing infrastructure and systems may

impact its competitiveness in the marketplace. The telco companies product and technical teams

should continue to keep abreast of the latest innovations and trends in telecommunications

technologies, devices and gadgets.

Growth and Faster Internet Speed of other Asian Countries Compared to the Philippines

The Philippines has one of the slowest internet speeds in Asia and the ASEAN region. The

Philippines garnered an average speed of 3.6 Mbps, which is the slowest in ASEAN. Comparing

the said speed to Singapore of 61 Mbps, this is the fastest in the ASEAN region. This is also

way below the average internet speed in the ASEAN region which is 12.4 Mbps and the global

average speed of 17.5 Mbps. This is quite alarming given the fact that around 42 percent of the

world’s internet users are coming from Asia and if the Philippines cannot improve on this, the

country can be left out of much of the possible opportunities being provided by the internet.
Lack of Connectivity in Rural Areas

As the Philippines transitions to the “new normal,” where not only work and education,

but also essential activities like government and commercial transactions will possibly shift to

digital modes, the remaining 45 percent of citizens who lack meaningful internet access, and the

74 percent of public schools that cannot make the transition to e-learning, will have their

productivity and education dependent on an internet connection. In these circumstances, internet

connectivity apparently promotes inclusion by allowing connected people to carry on with their

daily lives, but it also excludes those who have no meaningful access.

Product Risk Promotion through Diverse Audiences

Communication from different social groups needs critical attention to guarantee the

production of knowledge within the given product or service of the telecommunication

company. Product development should take place in order to manage people from different

cultures. This is an urge for the telco sector to associate the specific quality that can help

increase attractiveness within the market.

Traditional Influence of the Community

Interpreting product acceptance through customs being followed by the members of the

group. These socioeconomic activities must take effect letting their members have the right to
 access products of their liking. Offered products should also be flexible in terms of their

customers from multi diverse denominations.

Technological Factors

Opportunities

New Smart Phones and Mobile Internet Gadgets

The number of mobile phones in the Philippines is increasing steadily. In 2013 the number

is at 108 million, a 58.7% increase from its 2008 levels. Due to the increasing demand for

mobile internet connectivity and the ongoing network upgrades of the top telecommunication

players in the country, mobile phone subscription is still expected to pose a strong growth in the

future. Also, the availability of flexible financing schemes from various banks and credit card

companies will further fuel the growth in mobile phones in the country.

4G, LTE and 5G Technologies

With the demand for capacity and internet speed growing, various new technologies are

being developed my telecommunication equipment suppliers to support the forecasted growth in

the demand for telecommunication products and service and also to remedy the different issues

current telecommunication technologies have. One of the technologies that are being developed

are the so called 5G technologies or LTE Advanced (LTE-A).

Over-the-top Technologies

Over-the-Top technologies refers to usage of a dedicated internet infrastructure of

telecommunication companies to deliver content, normally from television, video and other

services, to customers via the internet. Because of these technologies, traditional mediums to

relay information are slowly moving to the IP landscape. This is critical nowadays given the fact

that the internet is slowly becoming the primary source of information. Over-the-Top

technology is a good opportunity not just for Globe Telecoms but also for all telecommunication

players in the Philippines. This will greatly increase the demand for internet usage, which the

telecommunication industry is the only industry that offer the said services.

Increase of usage in Social Media

Being one of the biggest, if not the biggest, country in terms of social media usage, the

telecommunication industry in the Philippines will greatly benefit from this due to the fact that

many of the country’s population is now using the social media platform to communicate with

friends, read news and other related activities. Also nowadays, businesses are now using social

media as a venue for their marketing campaigns. Growth in social media usage by businesses

will greatly increase the demand for telecommunication products and services most especially

internet connectivity.
Online Banking and Payment Services

Payment using cash is still the primary mode of payment but nowadays more and more

banks and other payment companies are slowly utilizing the internet as a mode of payment and

platform to do banking transactions due to the speed and convenience of doing transactions

online. Also, due to the rise in e-commerce, more and more Filipinos are expected to utilize

cashless financial transactions online. This medium might be a good contributor to future profits

for the telecommunication industry as the technology needed for doing online transaction is

provided by the country’s telecommunication companies.

Threats

Cheap Online Voice and Data Messaging Applications

Growth in the usage of various online voice and data messaging apps continues to grow.

This continues to eat up revenues from SMS and other telecommunication services. In 2014, it

is estimated that around 50 billion messages from instant messaging apps were sent every day

globally compared to 21 billion messages sent via SMS. But in terms of revenues, it is expected

that SMS still reigns, generating around $100 billion in total revenues, which is 50 times bigger

than the estimated revenues from instant messaging apps. Revenue from SMS is still expected

to decline in the coming years as the number of instant messaging apps and usage grows
Cyberattacks from Hackers

Globe Telecoms and other telecommunication players are prone to various hacking and

cyberattacks which might disrupt the normal business operations of the company. A perfect

example of this cyberattack is done by hackers to the company’s website last November 2014.

Investigation and cyber security improvement are currently being performed by the company in

order to avoid the said incident from happening again in the future.

Technological Readiness

The wireless telecommunication industry is among the most dynamic and advanced in

terms of technology. The digital age brought the world closer and access to information are easy

with just a click from the mobile phones. The Philippines secured the 55th spot out of 82

economies tracked in the latest Technological Readiness Ranking published by the Economist

Intelligence Unit. The said ranking gauged how prepared governments, businesses and

individuals are for digital disruption from this year until 2022 based on three key categories:

access to the internet, digital economy infrastructure and openness to innovation. Sadly, the

current standing of the Philippines is not as favorable as compared to other countries in the

region.

Internet Traffic
 Implementation of the enhanced community quarantine throughout Luzon brought a 40 percent

spike in internet traffic. With the current situation, the rising use of online connectivity and

remote access technology from home is likely to drive the need for greater capacity to maintain

network resilience.

Higher Cost of Technology

As the demand for internet speed and capacity in the telecommunication industry grows,

new telecommunication technologies are needed to support the increase. This can be a source of

new cost for industry players, if not managed well, due to the new materials that are needed in

order to upgrade the telecommunication industry’s current infrastructures.

Table No. 7

Porter’s Five Model for the Telecommunication Industry

THREAT OF SUBSTITUTES (MODERATE)

 Degree of substitutability
 Relative price and substitutes
 Quality and timeless of substitutes of
substitutes products

BARGAINING POWER RIVALRY AMONG EXISTING BARGAINING POWER

OF SUPPLIERS (HIGH) FIRMS (HIGH) OF BUYERS (HIGH)
 Existence of exclusive  Strategic behavior of the firms  Stiff competition
contracts  Mutual interdependence Elastic demand of
telecom subscribers

THREAT OF NEW ENTRANTS (LOW)

 Oligopolistic nature of the market
 Economies of scale
 Retaliation of telecom companies
 Based on Antonietta P Tungcab & Jean Paolo Gomez Lacap slides showing the telecom

industry position within the competitive market.

A moderate Threat Substitutes Product makes an industry attractive. According to The

Strategic CFO (Chief Financial Officer) In addition, it increases profit potential for the firms in the

industry. Risk situation in this level is that consumer switching costs are high substituting product

is more expensive than the industry product. Product quality substitution is inferior to industry

product quality as well as the performance is inferior to industry product quality. Product

substitutes are unavailable.

Bargaining Power of Buyers upon checking Strategic CFO if there are few buyers and

many sellers then it is declaring as high. Buyers are concentrated than sellers switching costs are

low. Threat of this is a backward membership is high one of the reasons are price sensitivity of

buyers for regarding the product they are well educated especially when it is undifferentiated.

Although purchases of buyer are in a high volume that make the sales go up substitutes are still

available.

An industry that that is low on Threat of New Entrants is an attractive one. CFI (Corporate

Finance Institute) define the following areas that in this position high brand loyalty is in the
current industry. Brand names are well known which also speaks of high initial capital investment

requirement. Suppliers and distribution of channels are little to no access with strong regulations

by the government. Threats are retaliated from existing competitors and if there is none

proprietary technology is required to be successful.

The Strategic CFO considers a high Bargaining Power of Suppliers if the buyer does not

represent of the supplier’s sales. Also substitute products are unavailable in the marketplace.

Browsing through libguides competitive rivalry is a measure of the extent of the

competition among existing firms. Intense rivalry can limit profits and lead to competitive moves,

including cutting, increased advertising expenditures, or spending on service/product

improvements and innovation.

 REFERENCES

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