Heavy capital spending by Philippine telecommunications giants PLDT Inc. and Globe Telecom will continue through 2021 as new challengers turn up the heat, Fitch Ratings said on Monday.
Fitch said their spending—most of which will go to network upgrades—was set to increase by 20-25 percent in 2021.
This indicated a significant increase from their 2020 budgets of about P70 billion and P50 billion for PLDT and Globe, respectively, with implications for industry earnings moving forward.
“Strategic execution will be key amid the challenges posed by the pandemic and rising competition,” Fitch said.
China Telecom-backed Dito Telecommunity earlier announced it was on track to launch commercial services to paying customers by March 2021.
At the same time, fiber internet company Converge ICT Solutions Inc., which completed the country’s largest public debut last month, expects to complete its nationwide rollout next year. Fitch cited other niche players such as Now Telecom Inc. making inroads in the sector.
“We expect competition to intensify in the medium term as new entrants expand coverage,” Fitch said.
At present, Fitch said Philippine telcos’ annual capital spending was equivalent to 40 percent of revenues—among the highest ratios in Asia-Pacific.
It said the push to create of an independent cell tower industry will also hasten the network expansion of the telco players.
Fitch said sector revenue is likely to grow by mid-to-high single digits in 2021 on the back of home broadband, a fast emerging sector during the COVID-19 pandemic, and “localized competition in mobile.”
Fitch also weighed in on the transition to fifth-generation (5G) mobile services, saying this would still take several more years as the telcos “preserve cash flow.”
“The telcos are likely to depend on the existing 4G network to meet data demand while pacing 5G investment over the next few years to preserve cash flow. Globe and PLDT are likely to restrict 5G fixed-wireless access to selected areas,” Fitch said. INQ