The end of the Filipino telco duopoly will open new doors for OTT video service providers

March 25, 2020

Filippo Giachi

VP – Asia, Middle East & Africa

Home to around 109m people, the Philippines is the second-most populous country in South East Asia (SEA), while new entrants to the mobile telecommunications market intent on winning market share and high levels of smartphone penetration make it an attractive market for over the top (OTT) video streaming providers delivering paid content to the country’s consumers.

The Philippines is a long-standing duopoly for telecommunications, with Globe Telecom owning 58% of the total customer base and PDLT (which offers mobile services as Smart Communications) the remainder. However the two incumbents’ dominance is about to be threatened by a pair of new market entrants – Dito Telecommunity and Now Telecom – and are investing billions of dollars in accelerating their rollouts of fourth (4G) and fifth-generation (5G) mobile infrastructure accordingly.

Globe Telecom launched the first 5G broadband service – Globe At Home Air Fiber 5G – in SEA in June 2019, a fixed wireless proposition which uses Huawei home routers to deliver download speed of up to 100Mbit/s to households in major cities (around 47% of Filipinos live in urban areas according to the United Nations).

Smart plans to roll out limited 5G mobile infrastructure in the first half of 2020 after running successful pilots delivering mobile bandwidth exceeding 700Mbit/s. Now Telecom is set to follow after entering a partnership with SK Telecom late last year, though it does not own enough of the requisite wireless frequency spectrum in the country to offers services on the same scale.

Dito – formerly Mislatel prior to its US$5.4bn acquisition by a consortium made up of China Telecom and Udenna last April – is currently spending up to US$6bn building its own mobile network 4G/5G infrastructure in line with its license requirements. The extent of all that investment has led GSMA Intelligence to predict that by 2025, 10% of the country’s mobile phone connections will be 5G enabled, and 64% 4G (compared to just 20% in 2018), a trend that will help deliver an extra 15m new subscribers to mobile phone services in the country.

There seems little doubt that Filipinos are highly dependent on mobile networks and devices to support their daily activity, whether personal or business-related. The country had around 173m mobile phone connections in January 2020 according to GSMA Intelligencei, up a staggering 28% on the previous year, indicating that increasing numbers of its citizens own more than one line.

Around 67% of the population (73m people) are also Internet users estimates GlobalWebIndexii, with 93% of those aged between 16 and 64 owning a smartphone, considerably more than own tablets (40%), games consoles (12%), smartwatches (10%) or dedicated devices for streaming TV content over the Internet (8%).

The high proportion of tech-savvy younger people in the Philippines is a significant driver behind that growth, with 74% aged 13 or over and 62% between the ages of 16 and 64. Consequently, the average time spent using the Internet is high – almost ten hours a day on average for 16-64yr olds, considerably more than the average duration spent watching television (nearly four hours a day) or using a games console (1hr 33 minutes on average), estimates GlobalWebIndex.

Around five hours a day are explicitly dedicated to using the Internet on mobile devices; however, with 95% doing so with a smartphone. Indeed, mobile Internet users account for 97% of the total number (just over 70m people), despite high ownership of laptop and desktop PCs in the country (67%). This may reflect the comparatively small difference between average speeds of mobile Internet connections (just under 17Mbit/s according to Ookla tests) and those provided by fixed broadband connections that are little faster than 25Mbit/s on average, having increased considerably from around 19Mbit/s only in the last year.

Share of web traffic by device too highlights a preference for mobile Internet use in the Philippines, accounting for 52% of total web pages served in 2018 (up 27% year on year), compared to 45% for laptops and desktop PCs (down 19% in the same period) according to numbers compiled by Statcounter in January 2020.

Watching videos is a favourite pastime for most Filipinos, with 98% of 16-64yr olds watching some form of online video. A survey conducted by Similarweb suggests YouTube is the third most visited website in the Philippines, for example. A high percentage (69%) of those in the 16-64 age group also watch TV content via some form of streaming subscription service each month, with 92% using entertainment of video apps.

Statista calculated the size of the Filipino subscription video on demand (SVOD) market at US$59m in 2020 with an average revenue per user (ARPU) of US$8.67 (its SVOD definition excludes ad-supported services, pay per view and pay-TV subscriptions). The estimated compound annual growth rate (CAGR) of 12% over the next four years suggests that total value will reach US$93m by 2024, by which time user penetration will hit 6.9%.

While it is fair to say that the VOD market in the Philippines has seen its ups and downs in recent years, a line up of established players has come to dominate the OTT streaming playing field. Kuala-Lumpur headquartered iFlix releases its first Filippino production in 2017. It has since maintained licensing and content deals with Filipino broadcasters including ABS-CBN and GMA Networks as well as international companies. The company has a distribution deal with PLDT (an existing investor alongside European pay-TV company Sky) to help expand its subscription base. It will also co-produce 20 movies and 9 tv series over the next three years under a partnership deal agreed with homegrown media firm Viva Entertainment in 2019. Viva itself launched an OTT IPTV streaming service (VivaLiveTV) via downloadable iOS and Android apps a year earlier, later partnering with Comcast to upgrade its delivery platform and expand its content library.

HOOQ also debuted in 2015, allowing Globe Telecom subscribers to pay for content via direct carrier billing (DCB) and backed by content deals with Hollywood studios such as Sony Pictures, Warner Bros, DreamWorks and Lions Gate Entertainment. Last year saw the company invest in producing a line up of local Filipino content while introducing new payment options via Google Play and the GCash eWallet app, with Globe at Home Prepaid WiFi billing options introduced in 2019. As well as payment centres and Internet cafes, HOOQ subscribers can also use cash to pay for their subscriptions in around 2,800 7-Eleven convenience stores in the country, a deal signed in 2019 which discounts the annual price to around US$10.

Having launched in 2016 with various DCB and payment options (including iTunes, eWallets, etc) for post-paid customers of both Smart and Globe Telecom, Netflix initially offered just its standard pricing plans ranging from US$7 to US$11 a month depending on definition quality and the number of screens can stream content simultaneously. But in a bid to attract more customers, it announced a mobile-only package this month [March 2020] that makes all of its content available on one smartphone or tablet screen for just under US$3.

Viu has delivered relevant Asian content to a Filipino audience priced at around US$2 per month since November 2016 via DCB for Globe Telecom post-paid customers (alongside credit card options). However, the majority of its Premium subscription content derives from licensing deals with major South Korean broadcasters.

Amazon Prime debuted in 2018, again in partnership with Globe Telecom whose customers can subscribe via a post-paid plan priced at around US$6 a month. Elsewhere Cinetropa is a small local player dedicated to bringing independent Filipino films to a global audience.

Filipino broadcasters and TV companies have built their own OTT platforms to try and compete. Cignal TV provides its Cignal Play OTT streaming app for Android devices via Google Play, for example, whereas iWant (formerly iWanTV) is the OTT platform and production company owned and operated by ABS-CBN.

As elsewhere in SEA, video piracy is a significant problem in the Philippines, which, coupled with a widespread reluctance to pay for internet content, has seen slow uptake of SVOD services in the country. Tribe, the OTT video streaming service owned and managed by Malaysia’s Astro and delivered in partnership with Globe Telecom, ceased activity in the Philippines in 2018 after two years of operations with management citing little appetite to pay for content amongst subscribers in various SEA countries. Others to have fallen by the wayside include and TVOD player Blink Now too appears to have ceased operations in 2017 despite employing both TVOD and SVOD business models.

While the improvements in fixed and mobile broadband infrastructure set for the next five years should at least eliminate problems with the reliable delivery of high definition films and TV shows to customer screens, the largely cash run Filipino economy and low credit card use could continue to slow SVOD progress. Less than 2% of Filipinos have credit cards, 5% mobile money accounts, and only 32% an account with a financial institution.

With so much eCommerce activity embedded in the smartphone, MNOs are in a strong position to expand their customer base and improve the end-user experience by orchestrating and facilitating those mobile payments. The Philippines is one of eight APAC countries in the top ten global markets for mobile payments and is actively looking at developing blockchain-based ID programmes to improve cybersecurity and data privacy safeguards while combatting fraud.

Over a third of Filipinos aged between 16 and 64 (37%) use mobile banking apps every month, for example, and 59% shopping apps. Almost two-thirds of all Internet users (66%) also reported making an online purchase via a mobile device at some point in any one month, according to GlobalWebIndex. The share of the business to consumer (B2C) eCommerce transaction value conducted via mobile is 37% according to PPROiii, exceeding US$1bn.

Yet while those transactions may be initiated on smartphones or other digital devices, almost half (47%) of the total estimated US$3bn of e-commerce activity conducted in 2019 was funded by cash payments however, with bank transfers accounting for another 42%, credit cards 10% and e-wallets 1%. MNOs looking to shift more of those transactions into DCB also face a challenge in that 97% of all mobile connections in the Philippines are pre-paid rather than post-paid.

As such, they need to think strategically about the billing mechanisms they can use to charge subscribers for OTT video subscriptions and transaction-based content purchases, via both post and pre-paid mobile phone bills and consider alliances with third party payment providers that can accommodate and streamline different types of payments with multiple OTT service providers simultaneously.

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