PLDT: A Century of Building the Network That Replaces the Last One

PLDT’s story is the Philippine telecommunications story. This story covers the monopoly era, deregulation, the mobile duopoly, the messaging boom, capital intensity, the fibre build, tower sales, data centres and the third-player question — part of the Philippines Company Stories hub.

What did the monopoly era look like?

Long waiting lists for telephone lines, high prices, poor service quality and an installed base far smaller than the population and economy warranted.

Fixed-line penetration was among the lowest in the region, which was a genuine constraint on business and a persistent public grievance.

That failure is what made mobile adoption so explosive later: a population that had never been able to get a landline adopted mobile phones with no legacy attachment at all.

What did deregulation change?

It opened the market to new operators, required interconnection between networks and ended the effective monopoly on long-distance and international traffic.

New entrants built mobile networks quickly because mobile infrastructure could be deployed far faster than copper, and because prepaid removed the credit barrier that had limited fixed-line subscription.

The incumbent responded by building its own mobile business and eventually by acquiring competitors, which is how the market consolidated back toward two dominant groups.

Why did text messaging become so dominant?

Because it was extremely cheap relative to a voice call, worked on the simplest handsets, and suited a population managing small prepaid balances carefully.

Volumes reached levels that surprised operators worldwide, and the Philippines became known internationally for the scale of its messaging usage.

The revenue was extraordinarily profitable because the marginal cost of a message was negligible, which funded network investment for a decade — until messaging applications over data made it free.

How did over-the-top applications change the economics?

They replaced high-margin messaging and international calling revenue with data traffic that generates far less revenue per unit of network usage.

Operators worldwide faced the same substitution, and the standard response was to price data in bundles and to grow subscriber numbers faster than revenue per user declined.

The structural consequence is that operators now carry enormous traffic growth with flat revenue, which is why network cost efficiency has become the central operating discipline.

Why is capital intensity such a problem?

Because network investment must be made continuously — new spectrum, new radio technology, fibre backhaul, submarine cables, data centres — while the revenue it supports grows slowly.

Archipelagic geography multiplies the cost. Serving thousands of islands requires submarine cable, microwave links and remote sites with their own power and security.

The result is a business with utility-like capital demands and consumer-like competitive pricing, which is a structurally difficult combination.

What was the fibre build about?

Replacing legacy copper and expanding fixed broadband to homes, in a country where fixed internet penetration was low and speeds were poor relative to regional peers.

Demand proved enormous once the service existed, driven by streaming, remote work, online schooling and the outsourcing workforce’s home connectivity requirements.

The build was also more expensive and slower than planned, involving right-of-way negotiation, permits from thousands of local government units and physical works in congested cities.

Why sell the towers?

Because passive infrastructure — the tower structure, power and site — is a utility asset that specialist owners value more highly than an operator does, and because sharing towers across operators is more efficient than duplicating them.

Sale-and-leaseback releases capital for network and fibre investment while the operator retains access as a tenant under long-term contracts.

The trade-off is a long-term lease obligation replacing an owned asset, which raises operating cost permanently in exchange for cash today — a decision that looks better when the capital is deployed well.

What is the data centre opportunity?

Growing demand from cloud providers, enterprises and content platforms needing local hosting, in a country that has historically had limited capacity relative to its population and digital activity.

Operators are natural builders because they own the connectivity, the land, the power arrangements and the enterprise relationships that data centres require.

The constraints are electricity cost and reliability, which are the two things data centre operators care about most and the two things the Philippines does least well.

What is the enterprise business?

Connectivity, cloud, cybersecurity and managed services sold to corporations and government, plus the specialized requirements of the outsourcing industry.

It matters strategically because consumer mobile revenue has stopped growing while enterprise demand rises, and because business customers pay for reliability rather than only for price.

Outsourcing clients in particular require redundant connectivity, guaranteed uptime and security certification, which is a demanding and profitable segment.

Why did the third-player entry matter?

Because a duopoly with high prices and mediocre quality was a persistent political issue, and a new national entrant was expected to force both incumbents to invest and compete.

Building a national network from nothing in an archipelago is enormously capital-intensive and slow, requiring site acquisition, permits and equipment across thousands of locations.

The competitive effect has been real but slower than the political expectation, and the incumbents responded by accelerating their own investment, which was arguably the point.

What are the ownership constraints?

Constitutional limits on foreign ownership of public utilities have historically capped foreign stakes in telecommunications, which shapes how the industry is financed and who can enter.

Legislative reinterpretation has narrowed what counts as a public utility for these purposes, which opened space for greater foreign participation in telecommunications specifically.

That matters because network build requires capital at a scale domestic markets struggle to supply, so ownership rules directly determine how fast infrastructure gets built.

What is the lesson?

That telecommunications is a treadmill. Every technology generation requires new capital, and the revenue from the previous generation funds the network that replaces it.

The second lesson is that infrastructure and service are different businesses with different economics, which is why operators worldwide are separating towers, fibre and data centres into vehicles that value them properly.

The third is that geography sets the cost floor. An archipelago will always be more expensive to connect than a contiguous landmass, and no amount of competition changes that arithmetic.

How does spectrum allocation work?

Regulators assign frequency bands to operators for defined periods, and the amount and quality of spectrum an operator holds determines how much traffic its network can carry.

Low-frequency bands travel further and penetrate buildings better, which suits rural coverage; high-frequency bands carry more data over short distances, which suits dense urban capacity.

An operator short of the right bands must build more sites to deliver the same service, which is why spectrum policy affects capital expenditure more directly than almost any other regulation.

What is network sharing and why does it matter?

Arrangements where operators share towers, radio equipment or even spectrum rather than each building complete parallel networks in the same locations.

In expensive geographies it is the difference between one good network and two inadequate ones, since duplicated infrastructure consumes capital that could have extended coverage.

Regulators weigh the efficiency gain against reduced competitive differentiation, and the usual compromise is sharing passive infrastructure while keeping active networks separate.

How do operators price data in this market?

Through small bundles matched to daily cash availability — a day of access, a fixed volume, or unlimited use of a specific application — rather than monthly allowances.

This mirrors the sachet economy in consumer goods: the product is sized to what the customer can pay today rather than to what they would consume in a month.

It produces high transaction volumes and low revenue per transaction, which requires digital top-up infrastructure and a distribution network reaching every small shop.

What is the outlook for revenue growth?

Modest in consumer mobile, better in fixed broadband where penetration is low, and strongest in enterprise services and data centres where demand is growing from a small base.

The structural challenge is that traffic grows far faster than revenue, so each additional gigabyte carried generates less than the last while costing the same to transport.

That is why the industry’s strategic focus has shifted from subscriber acquisition to cost per gigabyte and to businesses priced on value rather than volume.

What happened with the capital expenditure overrun?

The company disclosed that budgeted network spending had been exceeded by a very large amount over several years, discovered through internal review rather than external audit.

The disclosure triggered a share price fall, governance scrutiny, executive accountability and a review of procurement and budget controls across the group.

The episode is instructive because the underlying spending was on real network assets: the failure was in control and reporting rather than in the value of what was built.

How do operators manage their submarine cable exposure?

By participating in consortium cable systems, buying capacity on multiple routes and maintaining restoration agreements so that traffic can be rerouted when a cable is cut.

Route diversity is the practical protection, since cable breaks are frequent and repairs take weeks even when a specialist vessel is available.

Investing in new cable systems also secures long-term capacity at lower unit cost than buying it from others, which matters as traffic grows continuously.

How does the group monetize its enterprise data assets?

Through managed connectivity, cloud hosting, cybersecurity services and analytics sold to corporations and government agencies that lack the internal capability to run these themselves.

Margins are better than consumer mobile because the customer buys reliability and expertise rather than a commodity connection, and contracts run for years.

Competition comes from global systems integrators and cloud providers, so the operator competes on the connectivity it uniquely controls and on local presence and support.

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