Now Corp. to use guerilla tactics vs telco giants

Listed Now Corp. is making a big bet in the telco industry as it prepares to compete starting next year with incumbent giants Philippine Long Distance Telephone Co. and Globe Telecom for a slice of the mobile text messaging and broadband businesses, a company executive said Monday.

The strategy, through Now Corp.’s unit Now Telecom, mainly involves text-only mobile services at less than half the price of existing rates as well as dedicated Internet services, said Now Corp. CEO Mel Velarde, likening the plan to “guerrilla tactics” used against larger opponents.

That means Now Telecom was planning to offer text services at an “unlimited” daily rate of under P3 against the average P7 being charged by Globe and P6.66 charged by PLDT units Smart and Talk ‘N Text, he said. Sun Cellular, which is also owned by PLDT, charges about P5 daily, he said.

The group was planning to invest about $28 million to roll out the text service over the next two years in mega Manila as well as another $20 million for broadband.

Velarde said they would decide over the next 60 days on how they would structure the fundraising, which could involve the sale of debt or new shares to investors possibly before the end of 2014.

“We think this is a common man’s text facility,” Velarde said. “It is following the disruptive model of sachets in soap and sachets in shampoo.”

The move comes as traditional telco margins, while among the highest industry-wide, are challenged by alternative messaging services and social networking sites.

But Velarde said there was a chance for Now Telecom to grow its business given the massive amounts of text messages sent daily, or about two billion per day as estimated by the National Telecommunications Commission.

He said Now Telecom can start making money off its text services with just a small market share, or 2 to 5 percent, given the relatively smaller capex in putting up base stations. Velarde noted that investments would significantly increase if mobile calls would be allowed.

Now Telecom is targeting to have 2.9 million text subscribers by the fifth year, generating about P1.6 billion in revenues.

With no telco revenue expected this year, Now Corp. was still looking to book a 46-percent increase in revenues to P116.1 million from existing service revenues, mainly from IT resource management and software licenses, briefing materials showed. Profit this year was expected to hit P1.96 million. Miguel R. Camus