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Early last year--not long after former Singapore Prime Minister Lee Kwan Yew joked that "98 percent of Filipinos are waiting for a phone line, and the other two percent are waiting for a dial tone"--President Ramos launched a campaign to deregulate telecommunications in the Philippines and open the sector to competition in order to spur investment.
While deregulation has yet to produce substantial improvement in telecom services, it has caught the attention of the Philippine Long Distance Telephone Company (PLDT, which has had a near-monopoly of both local and long distance services), foreign investors, and some of the most powerful Filipino families.
Now, a year after deregulation, the telecommunications sector has more players than the Philippines can possibly support, according to a recent report from the U.S. Embassy in Manila. PLDT is likely to remain the dominant player, but as many as 10 other firms are ready to fight for the number two spot, the report states.
Analysts generally agree that consolidation will occur over the next five to 10 years, and most players anticipate a relatively gentle evolution through mergers and alliances rather than bankruptcies and hostile takeovers, according to the report.
Meanwhile, foreign firms can expect tremendous trade and investment opportunities as PLDT and the new players build and expand their systems. But the opportunities will not be without risk. The report states that significant investment or supplier relationships with the new startup firms are likely to come under financial, technological, political and market pressures as the Philippines telecommunications sector comes of age.
INADEQUATE SERVICE
A weak telecommunications sector has been one of the many infrastructure deficiencies that has curtailed economic growth in the Philippines.
Although more than 50 firms provide telecom services in the country, PLDT has cornered more than 90 percent of the market. Critics of the company have charged that PLDT's near-monopoly position allowed it to fend off competitors and invest little in either maintenance or expansion.
In any event, most of the Philippines does not have adequate telecom service. The country's telephone density of less than one phone per 50 people is among the lowest rates in the region. By the end of 1992, PLDT's backlog of unfilled orders for phone lines climbed over 800,000.
In the past,...