Mobile Telecom Hooks up With Typhoon Alley and the Ring of Fire in the Philippines

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The ever-moving plates of the Ring of Fire and Typhoon Alley make the Philippines the planet leader of death by natural disasters. Over 2,300 people were lost last year alone, compared to China's reportedly 700 lost. Both the knowledge of the fate of loved ones and friends, and provision of relief and restoration efforts, will hinge on the resiliency of the communications network.

In the Philippines, as in many emerging countries, mobile telecommunications networks shoulder the bulk of both of voice and data transmission. Mobile is rapidly substituting for fixed services nationwide in the Philippines, with a 10% year-over-year growth rate and a nearly 4% penetration rate. In areas with a very small fixed presence, like Leyte (where Typhoon Yolanda hit last Friday), mobile is all that exists.

Major mobile players in the Philippines
The two Philippine cell phone networks, Globe Telecom (NASDAQOTH: GTMEF  ) and Smart Telecom, a wholly owned subsidiary of Philippine Long Distance Telephone Company (NYSE: PHI  ) , were hit hard with extreme outages in Leyte, and both immediately responded with mobile repeater stations, relay networks, and restoration services. But, both were also hit financially with a downward trending ARPU, or average revenue per unit, as they struggle to provide higher premium services. For now, these companies must restore communications in a life-and-death struggle for weeks and months to come. But, restoration requires both power and signal.

Making mobile "more mobile" means putting cell infrastructure on physically mobile platforms. For months after Hurricane Sandy hit New York City, mobile tower units, or MTUs, dotted the communications-rich area of lower Manhattan. MTUs can also be mounted in barges and aircraft and shipped to remote locations. The 30 km range of a standard base station can be further enhanced with micro (2 km), pico (200m), and femtocells (10m). With such enhancements, cell phones don't have to use as much battery power to get signals to a cell tower.

Globe Telecom already uses outdoor distributed antenna systems, or ODAS, to extend its network reach and quality. It is also completing a $700 million infrastructure investment program. Both Smart and Globe are deploying MTUs to Yolanda disaster sites.  

Focus on Globe Telecom
Both Smart and Globe are vying for market share in an economy that continues to have a volatile growth pattern. Smart is owned by the incumbent PLDT. Globe is owned by Singtel (NASDAQOTH: SGAPY  ) , Ayala, and Asiacom. Ayala is a Philippine business group known for strategic investments in nearly all sectors in the Philippines. Singtel's stake demonstrates the potential strength of profitable revenue growth in East Asian infrastructure markets and the interest of the Singapore government in all things east Asian. Through these investors, Globe is poised to grow subscribers by more than 10% per year, and increase more profitable, higher premium services to enterprises and upper middle class segments. The company needs to act now, as its profits have been hit by more than 15% year-over-year and its last Fitch/Moody's rating (BBB-/Baa+) is over a year old.

Questions for further analysis
Will Singtel bring to bear the experience, wisdom, and funding of its integrated Australian telco, Optus, to bear on winning the unmet demand for quality telecom service in the Philippines? How will Singtel and Globe tap further into the Philippine call center boom? How can margins be improved with MTUs, ODAS, and other technology in emerging markets?

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