Philippine telcos to face closure or expropriation

“Kindly improve your services before December 2020”, warned Philippines President Rodrigo Duterte. On July 27, 2020, and during his State of the Nation Address (SONA) at the House of Representative in Metro Manila, the president called on operators, Telecom Globe and Smart Communications to improve their services otherwise he will order a government takeover. “I might just as well close you and we revert to the line telephone,” Duterte said in his speech.

The President also emphasized his commitment to improving the telecommunication services, as he will be the one to articulate the anger of the Filipino people, according to CNN Philippines. The president expects to spend the last two years of his term on improvements of the country’s telecommunications without the help of the two major players, he said.

Philippines suffers from poor telecommunications and internet services. President Duterte states that telecom companies are not progressing fast enough in the development of their services. “Don’t make us wait 10 years for services other countries are enjoying. Go and look for capital”, said the President, according to Total Telecom. In response to Duterte’s call, Telecom Globe said it has embarked $1.2 billion for network and capacity building, according to Total Telecom. The two major telecom providers seem to agree with the President’s call for action.

Telecom operators in the Philippines could expect their revenues to increase by nearly $650 million by 2025 due to the rollout of 5G, states a new study carried out by the American global management consulting firm Kearney. The introduction of 5G network will result in 50 times higher internet speed in the country, states the study. Despite having the highest social media users in the world, Philippines is ranked 107 in terms of mobile internet speed.

In the past, threats have worked to speed up the process to improve telecommunication services. In fact, in 2018, the President wanted to introduce a new company to the Philippines telecom market. In 2019, Mislatel Consortium, recently named DITO Telecommunity, has been officially introduced to the market. However, it is expected to launch commercial operations by 2021.

According to Speed test Global Index, mobile download speed is around 16.17 megabits per second compared with the global average of 34.6 Mbps. According to Inquirer. Net, Senate Minority Leader Franklin Drilon said during an interview “Even in the senate sometimes we have a teleconference talking about telcos and we could not hear each other because the signals are very poor”. Moreover, Senate Panfilo Lacson states that the President spoke the truth about companies’ performance, according to the same source.

However, not all senators agreed with the President’s threat to telecom operators. Senator Grace Poe emphasized the importance of accelerating the process of license approvals.” National agencies and local government should step up so that approvals for at least 25 regulatory permits won’t take 6 months”. Globe’s senior vice president, Yoly Crisanto avowed that the permits were the cause of delay, according to Total Telecom.

Senate President Pro Tempore Ralph Recto sees that improving services would only happen if there was competition. Thus, government expropriation is not the solution.

The president’s decision could affect the telecom industry, the economy, as well as the recovery from the Covid-19 pandemic. The threat of government expropriation of telecom companies could drive away foreign investments.