Our analysis of PLDT and Globe highlights that the overall revenue growth in the Philippines' mobile market is slowing down, leading to margin challenges for most operators. Both PLDT and Globe's revenues shrank 1% year-on-year in Q2 2010 (as opposed to 3% and 1% growth respectively in Q2 2009), while their EBITDA margins declined 1% and 11% respectively. Ovum anticipates this to be the first signs of impending market maturity caused by an ever increasing mobile penetration rate in the country. Ovum forecasts that the mobile penetration rate will increase from 78% at the end of 2009 to 98% by 2015, reaching a total mobile subscriber base of 107 million users.
"Our research in other markets suggests that focus on driving data services is typically the way to offset revenue decline," said Anubhuti Belgaonkar, Lead Analyst. "PLDT and Globe have now shifted focus to mobile broadband to drive revenue growth, a strategy Ovum closely agrees with." Given the low broadband penetration and the limited coverage of fixed broadband networks, mobile broadband appears to have immense growth potential in the Philippines.
To capitalize on this opportunity, PLDT and Globe are focusing on reducing ownership and usage costs to encourage uptake of mobile broadband. As a result, PLDT's mobile broadband subscriber base has jumped 90% year-on-year to reach 1.4 million in June 2010, while Globe's subscribers have increased almost two-fold to reach 596,000.
"Going forward, affordability along with adequate network coverage and capacity will be crucial for driving the uptake of broadband services in the Philippines. However, operators would have to be mindful of the associated costs to ensure that their bottom lines are not squeezed", concludes Belgaonkar.
