Globe and Smart take varying routes to technology

The decision of Smart Communication to cut on its investments on 3G is quite surprising. No less than its president Napoleon Nazareno confirmed that Smart’s unilateral decision was a function of what it had regarded a small local market for 3G, as it preferred to concentrate on providing basic telephony services (voice calls and text messaging) to its more than 20 million subscribers. Nazareno did not say the exact investment retreat, but it could be surmised that it was substantial. It could also be surmised that Smart does not have right now the sufficient wherewithal to carry out its planned 3G capital expenditures, although it could readily go to the capital market.

There was nothing wrong with its business decision. But what could be baffling were the circumstances surrounding this investment decision. The nation’s biggest wireless carrier has chosen to tread the conservative path at a time when Globe Telecom, its main rival, was pouring $100 million on 3G. Also, Nazareno had made the announcement two weeks after Philippine Long Distance Telephone Co. chairman Manuel Pangilinan had joined the sales pitch on 3G, making the latter a virtual salesman of services but not of ideas. Was Nazareno finally reining his wayward boss, who was adjudged the 2005 “Management Man?”

Although it could be said that Smart’s decision was carefully studied, Nazareno did not take pains to explain its strategic value-or wisdom. Neither did he mention his expectations from the investment retreat. All he said was that Smart was putting a hold on its 3G investments because of a limited market, indicating it would only invest if and when the market was ready. So long as the market has not matured, Smart would stick to the conventional wisdom that only necessity would push it to make substantial investments. In short, it does not intend to join the technology race just to make a point.

On the contrary, Globe is taking the bull by its horns. It is making substantial investments on the firm belief that 3G possesses plenty of potentials and that Globe could further capture a bigger slice of the already tightening market if it starts investing on the emerging technology. Globe’s main owners, the Ayalas, are better known for their conservative stance in investing, but they are now taking a big gamble on 3G, probably pawning their last heirloom to raise funds for this technology that has been hyped to excite the global wireless market. It was the same route Globe took 10 years ago when it built its GSM network to become the first local carrier to provide 2G services in the country. When text messaging exploded in the late ’90s and early 2000, Globe had half of the market.

3G is not an entirely different technology. It is an upgrade of 2G (voice calls and SMS), 2.5G or GPRS (voice calls, SMS, and MMS) and 2.75G or EDGE (voice calls, SMS, and MMS with faster download rate). It has been predicted that in due time, 2G and its upgrade would be rendered obsolete by the speed, power, and economies of scale, which 3G would have achieved. Indeed, the technology has arrived, only the applications have yet to be firmly put in place. It has also been asserted that in due time, local wireless subscribers would migrate to 3G, replacing their 2G handsets with the more versatile 3G handsets to create an explosion that was similar to late ’90s and early 2000.

The 3G potentials are highlighted by the fact that the Philippines has come out with a friendly regulatory environment for the emergence of this wireless technology. The spate of auction and regulatory fees is regarded a barrier to entry, but the National Telecommunications Commission has opted to exact minimal fees to allow the local 3G licensees to impose lower fees for 3G services. Learning from the mistakes of other regulators, the commission has come out with policies that lower the investment risks, which the 3G operators face in deploying the technology. The commission is keenly aware how Japan has given 3G spectrums for free and 3G licenses for minimal fees. NTT DoCoMo now has more than half of its subscriber on 3G.

Aware of the frenetic pace of wireless technological innovations, Globe however, has chosen to go straight to the 3G upgrade, which is HSDPA (high density downlink packet access). Hence, Globe has become the first telecommunications firm in Asia-Pacific that has launched “Super 3G” or 3.5G capabilities to both corporate customers and the general public. Now, the Philippines is probably the only country with the lowest per capita gross domestic product that offers commercial 3G services. It is even ahead of mass markets like Indonesia, Thailand, China and India. It joins 3G countries like Japan, Singapore and Hong Kong.

Even Globe is now crowing that its subscribers trying out Globe Mobile Broadband with HSDPA have been making video calls both locally and abroad to their pick of the largest number of video IDD destinations outside the country. They have been downloading full music tracks to their phones from the largest music library with a diverse choice of music from OPM to international music hits. They have been watching live national and international TV programs for free through their 3G video streaming.

Also, Globe believes that as the nation’s wireless market matures and begins to seek not just the standard voice calls and SMS, it will poised to offer a robust array of enhanced value added services to cater to the diverse requirements of the Filipino mobile subscriber. Its internal studies showed that by spending for new technologies, Globe would continue to capture a bigger slice of the mobile market. This is a basic corporate strategy to which it adheres.

Moreover, Globe understands that only by leapfrogging to 3.5G could it adequately prepare itself for 4G. Experiments on 4G have been reported successful and that it would be a matter of time for its commercial introduction. This is the corporate positioning it has chosen to take. In a way, Globe is also guiding the mass market toward maturity. Instead of leaving everything to chance, to the flux and flow of the imponderables, Globe has chosen to influence the market.

Smart is taking a different route. Whether it will be proven correct and vindicated at the end, only time can tell.

Source- http://www.manilastandardtoday.com

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