Sunday, June 5, 2016

Will a 3rd Mobile Operator Ever Try to Attack the Philippines Mobile Market?

Reasonable people--not to mention communications regulators--might well agree that duopolies, though better than monopolies--do not always deliver the benefits of competition in a robust way. That is not to say there is no competition: typically there is rather serious competition.

There simply is not the degree of disruption that happens when a third strong player enters a market.

So it is that some question the wisdom of San Miguel Corp. selling its spectrum assets to Philippine Long Distance Telephone Co. and Globe Telecom, the two dominant providers in the Philippines telecom market.

The deal raises more than $1 billion for San Miguel, and both PLDT and Globe acquired half of the assets.

The two operators, which together have a 99 percent market share of mobile connections, will pay a total of PHP52.8 billion ($1.13 billion) for assets including 700MHz spectrum.

Though San Miguel had tried to launch its own mobile business, it eventually decided to sell its spectrum assets to the two dominant providers, after failing to secure a needed operating  partner. In that regard, San Miguel had negotiated for a year with Telstra, but could not reach an agreement.

The Foundation for Economic Freedom  has urged the Philippine Competition Commission (PCC) to review the deal.

“The PCC should take into account that it is mandated by Republic Act No. 10667 or the Philippine Competition Act to implement the national competition  policy and prohibit anti-competitive agreements, abuse of dominant position, and merger or acquisition agreements that substantially prevent, restrict or lessen competition in the market,” FEF said.

About 20 MHz of 700-MHz spectrum apparently will be returned to the government for eventual auction, to encourage market entry by a third competitor.

That might not be so easy. Japan and South Korea also have been trying to encourage a third provider to enter their mobile markets, and have been repeatedly unsuccessful. One might guess that potential entrants see little chance of significantly cutting into the market share of the leaders in those markets.

That appears to have been the case in the Philippines as well.

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