The chairman of Philippine Long Distance Telephone Co (PLDT), the country’s biggest phone company that is a quarter owned by First Pacific of Hong Kong, is calling for a rethink of Manila’s policy of unfettered competition in the telecoms industry.
Manuel Pangilinan, PLDT chairman and First Pacific managing director, urged participants in the annual meeting of the Philippine Economic Society to review the idea that free and open competition was appropriate to small markets where the bulk of customers are poor and investment requirements are high.
His statements come at a time when government regulators are drafting policy guidelines on 3G, voice over internet protocol (voip) and other new telecoms services. The National Telecommunications Commission, the industry watchdog, is now accepting applications for 3G licences. The Philippine mobile phone market, which is 58 per cent controlled by PLDT, has also slowed while competition intensifies and demand has been hit by rising consumer prices. PLDT’s total wireless customers at the end of September did not grow from the 20.8m level at the end of June.
“Given the choice, I’d eschew the elegance of a free market policy,” Mr Pangilinan said. “Instead of free and open competition, an enlightened competition policy may be more appropriate for franchised industries where market size is dependent on mass market spending, where capital requirements are large, extensive and sustaining, and where there isn’t space for too many players if you want them to be profitable.”
As an example of the pitfalls of deregulation he cited Hong Kong, where phone companies suffered a reversal in their fortunes after the government doubled the number of players in 1997 from three to six. The industry has since consolidated, cutting industry participants to only four.
“Can we afford – with our meagre resources – to go through this wasteful cycle of deregulation followed by consolidation?” he asked.
The Philippines liberalised its telecoms industry in the mid-1990s, allowing new companies to provide international exchange and mobile phone services in return for building extensive fixed-line networks throughout the country.
But while greater competition led to the growth of mobile phones – more than a third of the 86m population own wireless units and the Philippines is considered the world’s “texting” capital – only a few of the new industry players were making money.