Monday, 26 June 2017

Innovative pricing key to driving mobile broadband in Philippines

By Mary Lennighan, Total Telecom, in Hong Kong
Thursday 18 November 10

Globe Telecom sees growing smartphone penetration despite 96% prepaid subs base; offers daily Facebook tariff.

The lack of fixed-line infrastructure in the Philippines means there is pent-up demand for mobile broadband, but the unique characteristics of the country's telecoms market present some challenges, not least in the pricing of services. Speaking at Mobile Asia Congress on Thursday, Ernest Cu, CEO of the Philippines' second-largest mobile operator Globe Telecom shared his company's strategies for tailoring service offerings to a low…

The lack of fixed-line infrastructure in the Philippines means there is pent-up demand for mobile broadband, but the unique characteristics of the country's telecoms market present some challenges, not least in the pricing of services.

Speaking at Mobile Asia Congress on Thursday, Ernest Cu, CEO of the Philippines' second-largest mobile operator Globe Telecom shared his company's strategies for tailoring service offerings to a low-ARPU, primarily prepaid customer base, including a specific tariff plan for fans of particular mobile Internet sites.

Globe's Surf All Day plan allow customers to select their favourite mobile Internet site, such as Facebook, and get unlimited usage of that site for 24 hours for 20 pesos (less than US$50 cents), explained Cu. Or for 50 pesos a customer can have unlimited mobile Internet usage for a 24-hour period. In addition, allowing users to top up in small amounts, or “low-denomination sachet pricing”, is vital. Globe Telecom allows prepaid users to top up in multiples of just 10 pesos.

“The Filipinos have a penchant to do quite a lot of Facebook,” said Cu, noting that social networking in general is very popular. “We are always publishing what we are doing,” he said. The Philippines has 14 million Facebook members, from a population of 92 million.

But as with other types of Internet service, social networking is primarily a mobile phenomenon in the Philippines due to the paucity of its fixed-line infrastructure. The country, which is made up of 7,000 islands, has just 2.5 million wireline connections, giving it a household penetration of only 10%. By contrast, there are 80 million SIMs in use, which effectively means mobile penetration now exceeds 100% of the addressable market, once the very young and elderly are taken out of the equation, Cu said.

As a result, “demand [for mobile broadband] is inherently there,” said Cu, even among prepaid users, who make up 96% of Globe's customer base. And despite the low spending power of many of its customers, the telco sees mobile broadband as a driver of ARPU at a time when voice and SMS revenues are falling; a price war in the market means customers are spending as little as 25 pesos per day for unlimited voice and SMS.

Although the country is majority prepaid, smartphones make up 20% of the market, Cu said. “[And] half of the new phones [being sold] are now 3G or data-capable,” he said.

Initially Globe thought netbooks would drive mobile broadband growth, Cu admitted. Sales of netbooks rose sharply as prices fell from US$700-$800 to $300, but then as prices plateaued, so did sales and smartphones took over.

“Smartphones are coming down in price,” and sales are up to 40,000 units a month, Cu said. He gave the example of the low-cost Samsung Champ touchscreen device, which Globe launched on a price plan of around $6 per month. “The sales just went through the roof,” he said.

Nonetheless, low ARPUs make life difficult for mobile operators. “50 pesos a day is very hard to make a living on,” admitted Cu.

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