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NEWS UPDATES 6 July 2009

Longer validity seen hitting Philippine telecom firms’ profit

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New regulation aimed at addressing consumer complaints against mobile phone service providers will squeeze further the margins of telecom companies at a time when subscribers are spending less because of an economic crisis, the Manila Times reported, quoting industry analysts.

Last week, Philippines National Telecommunications Commission (NTC) issued two memorandum circulars requiring telcos to extend the validity of prepaid loads, and to improve their quality of service by reducing the dropped call rates.

 The regulator is also set to issue circulars on per-second call charging and the revision of the telcos’ revenue sharing with their content providers.

Anthony Prince Yeung, equities analyst at AB Capital Securities, said the validity extension of prepaid card loads (credits) would crimp telcos’ margins and overall profitability.

He said these rulings come at a bad time since consumers are spending less on telecom services. He, however, said that consumers would benefit the most from the extension of prepaid load validity, adding that “consumers may not buy as often now.”

Jun Calaycay of Accord Capital Equities Corp. agreed, saying that telcos should be more creative to squeeze more revenues from their subscribers.

In the regulator’s defense, Edgardo Cabarios, director of NTC’s common carrier and authorization department, said the new regulation would impose no additional cost on telcos.

Cabarios said the telcos’ “carrying cost” or the average cost of operating and maintaining the network per subscriber of 150 peso for 45 days since 2000 should be lower today.

“While we considered the 150 peso. . . we also believed that from the year 2000 their efficiency improved,” he said, adding that the carrying cost should be P100 for 30 days.

Calling the extended load validity as “socialised pricing,” the NTC official said the main intention of the circular is to help those from the lower-income bracket.


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