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Merging Smart & Sun not good for consumers?

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PLDT now has an overwhelming majority of the telco business in the Philippines — it owns Smart, Talk ‘N Text, Red Mobile and now Sun Cellular representing more than 70% of the subscriber base combined {see earlier story here}.

Smart Comm • Merging Smart &Amp; Sun Not Good For Consumers? PLDT’s investment in Digitel (and effectively owning Sun Cellular) does not seem to make sense in terms of positioning. PLDT already has Smart as the premium network while Talk & Text is positioned at the other end of the prepaid spectrum (sachet economy). And then there’s Red Mobile which has only recently found a niche in the “unli” segment — obviously to counter Sun Cellular encroaching into its low-end subscriber base.

It is possible that despite PLDT’s heavy investment in Red Mobile, it still failed to prevent Sun from becoming a strong alternative (either as a secondary subscription or an “unli” vertical). This was evident when Sun was the first telco to actually hit the 1 million postpaid subscriber mark, way ahead of Globe and Smart. Granted, the ARPU with Sun Postpaid is way lower than Smart Postpaid subscriber, the fact still remains that on the low-end segment, Sun is growing very fast.

Here’s a rough breakdown of subscribers* by brand in 2010:

Globe Telecom – 14.4 million (up from 13.8 million in 2009)
Touch Mobile – 11.8 million (up from 9.3 million in 2009)

Sun Cellular – 16 million (up from 10 million in 2009)

Smart – 25.7 million (up from 24.2 million in 2009)
Talk ‘N Text – 19 million (up from 17 million in 2009)
Red Mobile – 950,000

The new combined subs of PLDT, if we are to include Sun Cellular, is now 61.7 million or 70% of the 87.9 million total (active SIMs, not unique subscribers). That’s not counting the over 400,000 Digitel broadband subscribers that will be added to PLDT’s 2 million subs.

Sun Cellular • Merging Smart &Amp; Sun Not Good For Consumers? In my recent discussion with a Sun Cellular executive, I mentioned that their role in the 3-way contest (Smart, Globe & Sun) is very crucial to the market and despite some of their shortcomings, consumers are happy Sun is doing a good job in competing with the big guys. They’re essentially the equalizer and a disruptor at the same time — making sure that rivals Smart and Globe are not locked into a perpetual stalemate.

Realme Philippines

I must admit that PLDT’s move to buy majority share of Digitel is a really smart one (no pun intended). First, if Sun continues to woo in the low-end market away from Smart/TNT/Red/Globe/TM, PLDT still wins. Second, Smart can learn a lot from the subscriber data that Sun has and could use it to strengthen its offers to postpaid subscribers. Third, PLDT can now utilize the additional frequency and the network that Digitel has rolled out across the country (Sun Cellular’s 3G network has nationwide roll-out already). Fourth, this will put Globe Telecom at a very odd position on just so many levels (so who’s gonna be the undisputed No. 1 on postpaid now?).

The only disadvantage I can see here is that Red Mobile can no longer throw punches at Sun Cellular with those hard-hitting TV commercials.

However, I don’t think there will be a consolidation of subscribers (merging Sun & Smart in the process). Sun will remain Sun, just like how PLDT separated Red Mobile and Talk ‘N Text for segmentation. The move is more like neutralizing the competition before it becomes more rabid.

So how does Smart and Sun Cellular becoming sister-companies be detrimental to the consumers at large? Well, here are some possible scenarios:

  • Say goodbye to the price wars (though not really entirely gone). From being a 3-way contest, it’s now down to 2 — PLDT vs. Globe. Smart, TNT, Red Mobile and Sun Cellular will hold an overwhelming 70% share while Globe is reduced to the remaining 30%.
  • Switchers no more. Subscribers who switched from Smart to Sun Cellular might feel slighted because they’re now technically back to the Smart network they left behind.
  • Smart’s weakness is now Sun’s disability. By association, whatever reason people didn’t like with the Smart network will infect the reputation of Sun’s network.
  • One less choice to make. That’s pretty much self-explanatory.

On the other hand, there are also benefits to this merger in some form or another.

  • Wider network coverage for existing Sun subscribers, especially with 3G mobile internet.
  • Smart can increase its network capacity if it is able to use Sun’s assigned frequency (same way Smart expanded with the purchase of CURE’s 3G frequency). That could translate to a less congested network and improved wireless connectivity (I hope).

Here’s a thought though — with the very saturated mobile market in the Philippines, I noticed that growth in subscriber base for Smart and Globe have slowed down significantly in the past couple of years except for Sun Cellular which posted an unprecedented growth of about 60%.

The only other way to get new subs is to poach them from other networks so the saying that “if you can’t beat them, buy them” makes perfect sense here. This move will effectively pad PLDT’s over-all growth by year’s end and that’s going to do wonders with the stock prices (and making their shareholders happy).

Update: PLDT and Digitel stock prices both went up today.

*ARPU – average revenue per user
*Subscribers = active SIM cards

Avatar for Abe Olandres

Abe is the founder and Editor-in-Chief of YugaTech. You Can follow him on Twitter @abeolandres.

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Earnest
7 years ago

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10 years ago

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mike
mike
10 years ago

this is a good move to both companies just hope that the unli services would not be cut out as we all now how the smart does it dirty tactics on us…and for globe i suggest do the things that made sun become popular make the unli services lik the SUN not compete toe to toe against smart if you want to make it..in the end people wil realize where they can save more!…

chua_riwap
11 years ago

mic test

Jericho
11 years ago

We use those services to our leisure activities, to know what is happening in the world, to communicate with our friends, and especially to call our families abroad. We cannot afford to have a no-choice or locked in on a limited set of service products.

watusi
watusi
11 years ago

bayantel pwede bang maging cellular provider?

dane
dane
Reply to  watusi
11 years ago

if they acquire permit to operate and frequency license from NTC

Fritz
Fritz
11 years ago

well apparently kaya binenta ng mga gokongwei ang digitel is because of low market value meaning sa stocks puro negative ang shares nila. smart, sun and globe coz of the unlimited wars. but the time they sold it bigla tumaas ung value nila sa stocks! and ang laki ng utang ng mga gokongwei. and right now. wi-tribe which is owned by san miguel corp. is planning to enter the market as well.

justme
justme
11 years ago

Sana sa merge nilang yan, maging 3G na ang buong pilipinas para broadband kahit saan. di kasi magamit yong plug it eh lalo na dito sa province. andaming bumili pero di naman magamit kasi GPRS lang ang signal. Para NATIONWIDEST coverage talaga. Naku, dito sa davao, kahit main city or capital city of mindanao, parang isang baryo lang ang 3g area. Hehe

erickjohncuevas
11 years ago

SUN is getting SMARTER or SMART is getting SUNNIER?

Jayson Moy
Jayson Moy
11 years ago

http://www.pldt.com.ph/investor/Documents/Digitel%20Investment%20-%20IR%20versionfinalpublic.pdf

…improve unli services for subscribers of both operations

David Z
David Z
11 years ago

And as been said before, this isn’t a monopoly…yet. It feels like one, but it’s not…yet.

And correction from earlier: update from PLDT yan, hindi Smart. Anyway, you get the idea.

David Z
David Z
11 years ago

Update from Smart mismo:

http://www.pldt.com.ph/media/Pages/PLDT%20to%20maintain%20Sun%20Cellular%20unli%20services.aspx

Some quarters had raised concerns that PLDT’s investment into Digitel would lead to the end of Sun’s unli offers.

“That’s not going to happen. There is a market for unli services and we intend to be the best in serving that market,” Nazareno said.

So…I guess we can put this to rest?

Name:
Name:
11 years ago

Bad for consumers and employees! Look what happened to those companies bought by Mr. Pangilinan.

BTW:
Abe Olandres – Defender of Willie Revillame? http://goo.gl/mP0ja
Yugatech fans: What’s your take?

adam
11 years ago

Meron din naman advantage pag nag merge ang Sun and Smart and that is ang SUN can now provide a better service like mas madami cellsite and mas malinaw ang calls. Pero tingin ko yun lang ang advantage ng makukuha ng sun.

arj
arj
Reply to  adam
11 years ago

although the news says, sun will still continue their services. perhaps signal will be one of an advantage. it’s the call and text that will be altered sooner or later

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