With falling ARPU, increasing churn and slowing sub growth, Globe Telecom CEO and president Ernest Cu said the revenue model is shifting toward the long tail.
“Gone are the days when you develop a product like SMS that generates billions of pesos. Besides SMS and over-the-air loading, I haven’t see any big hit coming from us or the industry as a whole.
“There is no silver bullet. It’s a long, hard slog going forward. But we believe growth in mobile broadband is very strong, that’s why we’re building out both Wimax and 3G networks.”
Cu was speaking at a telecom conference organized by Frost & Sullivan in early November in Manila.
Since everyone has the basics down, he noted that it’s important to have targeted offerings for smaller segments of the population. “Besides the long-tail affect, it’s no longer a one-size-fits-all market.” He pointed to the need to customize to the user’s behavior and habits.
With over 20% of subscribers using multiple SIMs, he said the battle is no longer for new acquisitions. “New subs don’t directly translate into increased revenue.”
Because of the changing market dynamics, he said Globe has had to fine-tune its approach and is focusing more on quality acquisitions. “We no longer aggressively give away SIMs with a large embedded load, because it doesn’t give value to the service. People are just looking for the freebies that come with the SIM.”
He said Globe is also looking at strategies that stimulate use. “The battle now is which SIM to use, which is similar to choosing which credit card to use.”
In the consumer’s mind, it’s a commodity, so he said they have to focus on things like loyalty, understanding usage profiles and designing services that fit those profiles.
Looking at the LTE-Wimax debate, Cu said both technologies have a place, particularly in a country like the Philippines.
Because of its geography, the political situation and the way urban planning has proceeded in the country, Cu said it’s very difficult to deploy wireline infrastructure in most areas.
“We think the at-home experience is just as important as the nomadic experience, so we decided to use Wimax in most areas underserved by DSL,” he said.
Globe doesn’t generally offer Wimax where it has fixed infrastructure.
Asked to choose between LTE and Wimax where there is no DSL, Cu said the choice would depend on the application. “For fixed application at home, we would definitely offer Wimax as the first preference. For nomadic and mobility, it obviously would be 3G given the ubiquity of coverage and selection of devices.”
As for the need for more government involvement or regulation, Cu said the best protection for consumers is competition. He noted that the price of mobile broadband has dropped from 100 pesos per hour to just 20 pesos per hour.
“What more can the government do? The next thing is the service is free. I don’t believe the government shouldn’t have too much involvement is an industry that is already policing itself by way of competition. With the private sector part of the global economy and having world-class companies competing vigorously against each other is the best way the industry self-regulates itself.”
With some countries considering curbing operators’ ability to manage traffic, Cu said there is risk that fair-use policy will be relaxed, which disrupts the business case.
“These networks come at great cost and the investment is based on a certain set of assumptions and usage patterns. There will be infinite need for bandwidth, so there is the danger that if unlimited use is mandated by the government, then investment in broadband expansion will stop and the quality will diminish.”