Telcos target youth as they move to digital age

Telecommunications companies have forged multibillion-peso investment deals, offered free Internet promos and entered into high-profile partnerships with global brands and content agreements with entertainment giant The Walt Disney Co. to raise their value proposition.

A young professional or even a high school student may not have been the image of a reliable telecommunications customer over a decade ago. But that is no longer the case today, as this tech-savvy demographic is at the center of a multibillion-dollar battle among big telecommunications players shifting toward the so-called digital future.

The advent of cheaper smartphones, the popularity of social media, richer content and instant messaging—all driving Internet usage—mean telcos are looking beyond traditional services like long-distance calls and SMS, or text messaging, to cater more to the demands of the young consumer.

As such, Philippine Long Distance Telephone Co. and Globe Telecom, which is part of the Ayala Group, have been taking steps to position and tailor their respective businesses to capitalize on this trend.

Manuel V. Pangilinan, chair of PLDT, the country’s biggest telecommunications services provider,  said it best during the company’s annual meeting in June.

“Clearly, the digital age belongs to youth,” Pangilinan told the company’s shareholders, while citing various digital platforms the company has introduced or plans to launch.

“I felt the same sense of excitement and opportunity—the hope, future and fun that the digital world offers our business, and to the youth and future of this country,” Pangilinan said.

In targeting the youth for the digital age, it’s a similar experience and strategy for Globe Telecom, according to its CEO, Ernest Cu.

“They are already pre-disposed to the digital lifestyle so it has to target the youth,” Cu said in an interview.

“It’s a short adoption curve for them so there is less transition,” he said. “For our older customers, there is more of a shifting and convincing required.”

The digital shift in the Philippines, backed by big money and larger ambitions, has not been a low-key affair.

There have been  announcements by the respective telco players on multibillion-peso investment deals, free Internet promos and high-profile partnerships with global brands, like social media site Facebook and content agreements with entertainment giant The Walt Disney Co.

The Philippines, after all, offers a compelling market for international companies, with its population of  about 100 million people and rising economic prosperity.

Of the Philippines’ total population, 44 percent are active Internet users and 32 percent access their social media accounts via mobile devices, according to data from United Kingdom-based consultancy We Are Social Ltd.

The bulk of Internet users are also relatively young given that they fall between the ages of 15 and 34.  Putting that in perspective, that age group will account for roughly 35 percent of the country’s total population by the end of this year, the Philippine Statistics Authority estimated.

Powering the Internet boom is the smartphone, the device at the heart of a global industry that would top an estimated $272 billion in sales in 2015, according to data complied by statistics portal Statista Inc.

When it was launched, smartphones were typically premium devices and were limited to the select few consumers who could afford them.

Now, more inexpensive models from China and even the Philippines are dominating the market, making the Philippines the third-largest smartphone market in Southeast Asia after Indonesia and Thailand  in 2014, global consultancy firm IDC said.

IDC added that sales would rise as vendors push down smartphone prices to the P2,000-level.

“The narrowing price gap between smartphones and feature phones made smartphones more palatable to budget-conscious Filipino consumers, leading to the faster adoption of smartphones in 2014 compared to previous years,” according to Jerome Dominguez, Market Analyst at IDC Philippines.

To cash in, both PLDT and Globe have been investing large sums to boost their data networks, amid expectations of surging Internet demand and amid criticism that their networks are not at par with the country’s neighbors in the region.

More spending is needed and telco players have lobbied heavily for government support.

An earlier National Telecommunications Commission study indicated that a staggering $16.6 billion (P764.4 billion) was required to bring 2 megabits per second download speeds to 80 percent of  Philippine households by 2016.

Right now, PLDT is revising its capital spending for 2015 higher with a budget that could approach $1 billion while Globe said it was spending up to $850 million.

Both companies indicated that most of that amount would be used toward upgrading high speed Internet services.

The timing is also interesting for the Philippines. The country was recently ranked in the global Digital Evolution Index as being  on the verge of the high-potential or “break-out” category and noted as one of the “rapidly-advancing countries” alongside China, Malaysia, Thailand and Vietnam.

The ranking was created by US-based Fletcher School at Tufts University using data from 2008 to 2013.

“We are…accelerating our digital initiatives as this future will require engaging our customers from a different set of lenses, as both individuals and enterprises embrace a digital life,” Pangilinan had said.

With the future direction firming up, both PLDT and Globe have embarked on distinct strategies involving a combination of investments and partnerships even with so-called OTTs, or over the top players, like Facebook and Viber that threaten their existing business models.

PLDT has executed high profile investment deals such as the acquisition of a now 6.1-percent stake in Germany’s Rocket Internet, the company behind online retailers Lazada and Zalora, as part of its e-commerce push. It also invested $15 million in Internet streaming TV company iflix.

Its investments, through its media arm, in TV5, satellite television company CignalTV as well as various print publications are also in line with a multi-platform approach were the company is betting its future position.

Likewise, Globe is betting heavily on partnerships such as those with  Viber, Spotify, NBA, HOOQ, and WhatsApp. The company’s board recently gave the go-ahead to establish a subsidiary for “non-core” businesses, and analysts have speculated this is related to the company’s digital initiatives.

With the advent of digital age and its focus on youth, the opportunity remains not only with domestic telco players but also with the broader economy, the Oxford Business Group said in its 2015 report on the Philippines.

“The propensity for Filipinos to consume online content and engage in social media presents opportunities for a range of technology firms involved in delivering media content, gaming, e-commerce and digital advertising,” Oxford Business Group said.

“If harnessed effectively, the Philippines possesses a number of ingredients that position it to emerge as a globally competitive tech hub,” it added.