Duterte's China play could spur innovation in Philippines

Shannon Beets / Kapronasia
19 Jan 2018

China Telecom and China Mobile, two of China's leading telecommunication companies, were approached by the Chinese government under a proposition to enter the Philippines telecommunications market.

The proposition was offered by Rodrigo Duterte, the Filipino President who wanted to challenge the Philippines telecommunications duopoly consisting of PLDT and Globe Telecom. China Mobile, the world’s largest phone carrier has 849 million mobile customers and 77.62 million broadband customers, and China telecom, close behind, has 215 million mobile subscribers and 123 million broadband subscribers.

The growth of China's mobile giants has seen them expand outside of China starting with Thailand, Pakistan and Brazil. With consumers in the Philippines becoming increasingly frustrated by the lack of service from the Philippine incumbents, the President has stepped in to break the duopoly controlling it.

Rodrigo Duterte put forth the proposition to China to challenge the Philippines duopoly through a 60-40 partnership agreement with an existing telecommunications company in the Philippines.

Throughout the Philippines, cash is still heavily used, although this is shifting towards mobile payments. Smart Communications and Globe Telecommunications, in conjunction with Dragonpay and PayPal, are transforming the mobile payment market. Some 30% of Philippines' e-commerce transactions are conducted electronically and it is expected that the eCommerce market will experience a 101.4% growth from 2013 until 2018.

The Philippines has 33 million internet users who spend 6.2 hours online every day. 43.1% of mobile users are already using smartphones in 2017, and this is predicted to increase to 50.3% by 2020. The Philippines is considered to be the fastest-growing smartphone nation in Southeast Asia, having doubled in the last three years due to decreasing smartphone prices.

Both of the Chinese telcos are looking into entering the market and could potentially setup mobile payment platforms of their own, although it is still not clear if they will. Needless to say, the market condition are ripe and either company coming in could be the push the market needs to drive innovation and infrastructure development, which is the outcome Duterte is hoping for.

Shannon Beets is an analyst at Kapronasia

First published on Kapronasia

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