Market structure, conduct, and performance of cellular mobile telephone system carriers in the Philippines / by Grace C. Digno.

Thesis (BSBM - - Marketing) Cavite State University.

Includes bibliographical references.

College of Economics, Management, and Development Studies (CEMDS)

DIGNO, GRACE C, Market Structure, Conduct and Performance of Cellular Mobile Telephone System Carriers in the Philippines. BS Thesis. Bachelor of Science in Business Management major in Marketing. Cavite State University, Indang, Cavite. April 2002. Adviser: Dr. Alice T. Valerio.
A study was conducted to analyze the market structure, conduct and performance of the Cellular Mobile Telephone Carriers in the Philippines. Specifically, it aimed to 1)
Present a profile of the industry; 2) analyze the structure of CMTS network in terms of seller
Concentration, product differentiation, barriers to entry and barriers to exit; 3) describe the pricing practices and policies being adopted by the CMTS carriers; 4) find out the competitive practices and policies CMTS employed; and 5) examine the performance of the cellular market.
Secondary data and information were gathered from National Telecommunications
Commission (NTC) and other private CMTS carriers head offices such as Globe Telecom, Smart Communication, Isla Communication Inc., and Pilipino Telephone Corporation. The descriptive method of analysis was employed to analyze the CMTS_ structure, conduct and
Performance as well as the Gini Coefficient Ratio to measure the degree of seller.
concentration. Presentation was also substantiated with tables and graphs. There were only four carriers included in the study, namely: Globe, Smart, Islacom and Piltel. Due to insufficient data and information, discussion on market performance was limited to efficiency. The analysis covered the period from 1995 to 2000.
The Philippine cellular market has been experiencing tremendous growth since the time it was liberated. Trend analysis showed an average growth rate of 65.04 % in the last six years of its operation. A phenomenal growth of 104.81 % took place in 1996. This was.
highly attributed to the unmet demand of landline users of PLDT from the period 1991 to 1995. Furthermore, the operations of three new carriers, namely: Smart, Globe mnd Islacom were in full swing.
The market was used to be dominated by the Pilipino Telephone Corporation (Piltel) from 1993 to 1995. It achieved a total of 202,358 subscribers in 1995, equivalent to 51.39 % market share in terms of on-line subscription. It continued to rise to 402,610 subscribers by1996. However in the same year, its market share started to decline by 49.93 %. Smart proved to be more aggressive in the network roll out in 1995. As such, after two years, it became the top CMTS player, registering 623,075 subscribers which is equivalent to 56.05 % market share dethroning Piltel from the top spot. Smart communications enjoyed a total of 285,479 subscribers at the end of the year 2000, registering an average growth rate of 82.35 % since 1995. Globe on the other hand, continued to exhibit a top-ranking performance in the latter part of 1990. It registered an average growth rate of 122.76 percent in on-line Subscription. Globe Telecom attributed its success to its fully digital GSM network. Islacom,
Currently with the least number of subscribers, was crawling through its regional home turf, the Visayas. Although it attained an 80.60 % growth in 1999, it sadly attained zero percent growth the following year.
The Gini Coefficient Ratio revealed that the market structure of the cellular network in the country is very much oligopolistic in nature. It further revealed that only two firms Control more than 80 percent of the market in terms of total assets. The ratio finally revealed very high concentration in the industry. Product differentiation, based on the services offered by each carrier, was being dominated by carriers which shifted from analog to digital network
Barriers to entry were high capital investments, fixed-line installation requirements, issues of fraud and cloning and government regulations. Barriers to exit, on the other hand, include high fixed costs of telecommunications equipment, high rate of return operating revenue and the carrier’s commitment to service.
The price determination process is based on the approval of the National Telecommunications Commission. However, with the oligopolistic setting in the industry, carriers are still free to impose mark-up percentage on their services. In this regard, there is a tacit collusion prevailing in some service rates of each carrier to avoid any price competition. The merger phenomenon in the latter part of 1990s and the early part of year 200(0 confirmed the industry's oligopolistic approach in its market structure. Finally, analysis on market Performance revealed that CMTS carriers incurred their largest operational cost from maintenance, materials and supplies, traffic expenses, commercial expenses, and general expenses.
Findings in the study clearly defines and satisfies the concept of oligopoly in the market structure of the cellular market. It can be concluded, therefore, that the Philippine Mobile Telephone System network has oligopolistic market structure. It was recommended that the level playing field must be consistently maintained through integrated planning and effective regulation through a well-prepared, goal-focused development plan, which may allow the entry of new CMTS carriers in the near future. Moreover, there should be political will on the part of the government to attract new CMTS carriers, and lastly, efficiency on
Processing of documents must be initiated.

Submitted to the University Library 05/29/2002 T-2310