Philippines on the brink of independent tower lift-off

For the last couple of years, much tower industry attention has been on the Philippines after President Rodrigo Duterte announced his intention of developing a Common Tower Policy for the country. New entrant Dito, who has recently received its license to operate, and the massive need for connectivity and coverage has made the archipelago very attractive for infrastructure developers and investors, but none of them have been able to rollout a single tower yet. TowerXchange headed to the country’s chaotic capital to find out what are the plans of the Department of Information and Communications Technology (DICT) and sat down with the MNOs to discuss their views and position towards the imminent emergence of the tower industry in The Philippines. 

After almost two years of regulatory disputes, a few delays and no little controversy, Mislatel has finally received its mobile license. The new Filipino operator, owned by local businessman Dennis A. Uy and state-owned China Telecom Corp, is rebranding as Dito Telecommunity and will challenge the PLDT and Globe duopoly imminently. The new MNO has committed to provide 37% coverage at an average internet speed of 27Mbps in its first year, with an initial investment of more than US$2.5bn, and the company is in advanced commercial and technical conversations with vendors and infrastructure partners, aiming to start its rollout after the summer.

Based on the incumbent’s numbers and its coverage commitments, Dito has 330 days to build 3,000 sites, which will not be an easy task. Towercos are confident that they can deliver those numbers, while Mislatel hopes that the upcoming tower policy won’t stop them from deploying their own towers, as the company plans to also build their sites autonomously and through local turnkey providers to minimise the risk of not meeting the mandated targets. While the industry awaits DICT’s tower policy and its terms, Mislatel is encouraging towercos to be ready with their local capabilities while they liaise with Filipino constructors as the rollout start is imminent.

Site acquisition and permitting will be the main challenges, but Dito has already submitted its deployment plan and has asked towercos to start working on that front, as they already know the desired location for their sites. The operator, who would have wanted to commission its first sites several months ago, aims to begin rolling out in the next two to four months. The 37% of the population that they need to cover would be easier to achieve, and generate higher ARPU, in urban areas, hence the company is expected to target Manila and other populated cities initially.

Unlike the incumbents, Dito is more likely to increase its rollout capex and build at least some multi-tenant towers, which would make the assets more attractive in a potential future sale and lease back, or should the company decide to carve out its own towerco in the medium term.

Although Dito’s long-term vision is to own and build all its infrastructure, the company is now negotiating with third-party data centres providers and fibre optic networks, and the government has authorised the MNO to work with the National Grid Corporation of the Philippines (NGCP), who have a vast dark fibre network across the nation. Urban areas are going to be Dito’s main target and rooftops will play a critical role in securing that mandated 37% coverage. The operator has also signed a collaboration agreement with the Metro Manila Development Authority (MMDA), which will accelerate urban small cell deployment in the capital, while the telco is also in touch with several passive providers that have access to real state owners across the country’s main cities.

The Department of Information and Communications Technology (DICT) has recently appointed Sen. Gregorio “Gringo” Honasan as its new Secretary, and former acting secretary Eliseo Rio. Jr will remain second in command as undersecretary for operations while the entity finalise the conditions and details of the common tower policy, which will be decisive in opening the door to towercos and will ultimately allow DITO to fulfil its coverage commitment.

After some rumours and speculation, TowerXchange has confirmed that DICT’s new leadership plans to go ahead with the Common Tower Policy and release the final version as soon as possible. In fact, the new secretary held a meeting with key industry stakeholders on August 7th to clarify previous misunderstandings, hear all the parties involved, and start finalising the policy terms. DICT now wants to include all parties’ inputs and needs in a policy that, in words of the institution, should be “fair with everybody’s requirements”. As of now, there is no timeline for its final version, but DICT aims to share a new draft in the next couple of months and get a definitive version soon after.

DICT’s priority is to develop the necessary framework to ease and accelerate tower deployment in order to drive connectivity in the country, as currently, The Philippines has one of the worst and most expensive internet services across Southeast Asia. Therefore, DICT will facilitate antennas and small cell rollout across public buildings and is also considering the implementation of tools to measure the quality of service in certain areas, which will help in determining how much more infrastructure is needed.

Whether MNOs will be able to rollout their own towers remains the biggest question. At time of writing, DICT had signed MOUs with 24 potential infrastructure providers and the final number of towercos that will be able to operate in the country is another big unknown. Competition will be indeed beneficial and a diverse tower market could help Mislatel and the incumbents, but future infrastructure providers should have certain degree of experience and financial strength, as the Philippines’ complex geography, its extreme weather conditions and the required initial investment could become problematic barriers for inexperienced players and investors.  In addition, too many developers looking for an early buyout could disturb the emerging tower industry operationally and both MNOs and their clients would be ultimately affected. 

On a positive note, the government has recently signed the implementation rules and regulations of the Ease of Doing Business law, a critical move that aims to eliminate bureaucratic barriers in different sectors and which will help both towercos and MNOs in obtaining installation permits. Based on this law, Local Government Units will have to provide permits within certain timescales; otherwise, permits will be automatically approved. Moreover, the government has created a commission that will review its implementation and is planning to release an executive order to both public and private entities to instruct them not to slow down telecom infrastructure deployment.

President’s advisor Ramon Jacinto, who is playing an instrumental role in the configuration of the Common Tower Policy, believes that towercos should be responsible for their majority of the upcoming rollout and that MNOs should exceptionally be allowed to build in very specific cases where their infrastructure partners cannot fulfil their requirements.

Both PLDT and Globe will benefit from the entrance of towercos into the country, but the emergence of a third MNO will definitely push them out of their comfort zone.

Neither of the incumbent operators wants to sell any assets now, while both companies are waiting on the DICT’s tower policy terms to see whether they would be able to continue building their own towers or whether deployment will be limited to towercos. Currently, most of their towers don’t have capacity to host more than one tenant, but the assets would still be attractive in a potential sale, as towercos could acquire them, reinforce or decommission the towers and build multi-tenant sites without going through the arduous permitting process.

For the last couple of years, market leader Globe was considering a sale or a carve out of its almost 9,000 towers. However, the company has now put that possibility on hold and will continue its expansion through BTS agreements with towercos in line with the government mandates. The company has signed an MoU for the deployment of 150 sites across the Calabarzon region with edotco and its local partner ISOC, who are currently working together and plan to formalise their joint venture shortly. Globe has also signed another MoU with Aboitiz InfraCapital and Frontier Tower Associates Philippines (FTAP), who have also closed a partnership to develop towers in the country.

With 85 million subscribers, Globe plans to continue expanding coverage across Philippines spread geography, although Cebu, Davao and Metro Manila are the company’s main priorities due the high population and increasing demand of those areas. Globe has declared its willingness to collaborate and support the tower initiative, and several company executives have confirmed to TowerXchange that they believe working with towercos is the best way forward.  Moreover, the company has been allowing access to its sites to local MVNOs, so Globe is not new to the idea of infrastructure sharing.

Although the percentage of off-grid sites is very low, securing a continuous power supply in certain sites is sometimes challenging, and both operators currently rely on gensets for backup. Globe is now moving towards greener alternatives and installing lithium batteries progressively across their sites. The company is also exploring fuel cells and testing some renewable solutions for the future.

For its part, PLDT has declared that they are not willing to share access with rival Globe on their ~9,850 existing towers, but the MNO would consider synergies with the other telcos on new sites. Although PLDT won’t be selling any of its assets, the company is also open to the idea of working with towercos in order to reduce capex and drive efficiencies and it is very keen on finding a partner for IBS deployment.

PLDT has been very active in 5G development and the company has recently conducted a test alongside Nokia in Manila, while also doing R&D work with other telecom leaders, exploring different solutions for the development of 5G technology as the company plans to be ready for its implementation by 2020.

PLDT is also looking at greener solutions and currently evaluating lithium battery installation and renewable energy generation to reduce their costs and carbon footprint in the country.

Demand is quickly growing in the Philippines and the incumbents have a huge amount of spectrum, so they are able to add capacity and offload traffic by adding more equipment to their existing sites. Regardless, the entrance of a new player will affect their market share and both will be forced to improve their services and increase their coverage by deploying new sites in this new competitive scenario.

Although not many international developers and investors are aware of its presence in The Philippines, NOW Telecom plans to play a role in 5G development. The company has recently renewed a 25-years franchise to provide fixed wireless, mobile and satellite internet services and the National Telecommunications Commission has awarded them a license to operate.

This niche operator only targets enterprises and provides fixed wireless access to different business in Metro Manila using its portfolio of 400 radio antennas that are located in rooftops across the capital. NOW owns a 3.5 GHz frequency and plans to use it to develop a 5G network that will provide innovative services to businesses in the near term.

The company will not be deploying macro towers, but they will have a considerable need for urban poles, antennas, small-cells and IBS. NOW Telecom is currently looking for an urban infrastructure partner that can ease their deployment, achieve scalability and standardise the technological requirements and setting of their sites in Manila.

The appeal of the Philippines seems obvious: we have an underserved virgin market with three MNOs—one of them coming in full force and supported by China Telecom’s financial strength. Mislatel needs at least 3,000 towers in the next year and the country has to double the current number of sites to achieve targeted levels of coverage and service quality. Moreover, the government is building the necessary regulatory framework to push the industry forward, facilitate the entrance of towercos and ensure their successful penetration.

However, towercos will not have an easy path. For decades, the duopoly has made Globe and PLDT very comfortable and unfortunately, the operators are most likely to start giving away the most challenging rollout slots to their infrastructure partners.

Traditionally, permitting has been one of the main headaches, as you require an average of 25 different licenses per site on a process that can take up to nine months. The country has around 50,000 powerful barangays—Filipino local government units—who tend to complicate and delay deployment. The Ease of Doing Business legislation should improve and accelerate the process, but its effectiveness is still to be proven. In addition, the government willingness to welcome towercos is unquestionable, but the Common Tower Policy implementation has experienced several delays and many international investors and infrastructure developers are still waiting on its guidelines before making the final move.

The Philippine archipelago comprises more than 7,000 islands, which makes logistics complex. MNOs are set to continue focusing on urban and more accessible areas, but eventually they will have to expand to rural and remote regions in order to find growth, which will bring operational headaches but also plenty of opportunities in energy and security for experienced and creative towercos and their partners.

Both initial investment and risk are relatively high, and capex will be considerable too. In addition, The Philippines has one of the most extreme weather conditions in the world, with flooding, earthquakes and high winds disrupting operations. Health and security must be prioritised in The Philippines, and that is another reason why experienced and skilled infrastructure developers will be required.

With the exponential data growth and both PDLT and Globe already testing 5G, fibre and small cells should be key elements of towercos’ offer in the country. Many buildings in Metro Manila and other urban areas are owned by a few national developers, so it should be relatively easy to partner with them to secure attractive slots than can later host the three country’s operators equipment. The government will be facilitating access to public buildings, and billboards will also be an attractive resource for tower companies in urban areas—since Pilipino billboards are famous to be the most robust across the globe due to the aforementioned extreme weather, therefore their structures can easily accommodate microsites and small cells.

The ball is now in DICT’s court and the implementation of the policy as well as the appropriate conditions are the final step towards the creation of the new Asian tower market. Although the likes of edotco, American Tower and his, among many other towercos, have already been on the ground in the country, many international players are awaiting on the right policy terms and its implementation before making the final move. The opportunity is obvious, so is the risk, and towercos will need to embrace both.