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International -- Asian Business: PHILIPPINES
NOW, PHILIPPINOS DON'T HAVE TO WAIT SIX YEARS FOR A PHONE (int'l edition)
Upstart Bayantel is growing fast by besting a stodgy monopoly
It has been four years since former Singapore Prime Minister Lee Kuan Yew came to the Philippines for an economic powwow and stung his hosts with a jibe. Lee joked that 98% of the Philippines was waiting for a telephone, and the other 2% were waiting for a dial tone. A lot has changed since then. As a result of sweeping deregulation, the array of companies that have sprung up in the Philippines' newly competitive, rough-and-tumble phone market have revolutionized the industry. Rates have fallen as the new companies battle for business in what previously had been one of Asia's least-developed phone markets.
One big winner may turn out to be an offshoot of one of America's Baby Bells. It's a venture between Manila's wealthy Lopez family and New York-based Nynex Corp. called Bayan Telecommunications Holdings Corp. (Bayantel). Alone among the newcomers, Bayantel has attacked the former phone monopoly head-on in conventional fixed-line service. And now, it's plunging into the cellular market, announcing on Nov. 11 that it's buying a controlling stake in local operator Extelcom.
"AGGRESSIVE." Bayantel has more in mind than just phones. The Lopez family owns radio and television stations and runs the country's largest cable network. As regulatory barriers crumble, Bayantel ultimately hopes to deliver cable television and interactive services as well. "We want to be a major player in the Philippines," says Bayantel Vice-Chairman Paul C. Duffy, a former Nynex executive. "We are going to be as aggressive as we possibly can."
Bayantel, 65% held by Lopez interests and 20% by Nynex, is the first of the new operators to have a significant consumer base in land-line service. In September, it installed the last of 300,000 conventional lines required by government policy--a year ahead of schedule.
And it's itching for more as it takes on the behemoth, Philippine Long Distance Telephone Co. (PLDT), which has been gradually losing its monopoly. Upstart Bayantel is shooting for 1 million fixed-line customers by 2000. But by then, PLDT plans to have close to 3 million lines. Duffy expects revenues this year to be nearly $80 million, double last year's level. Next year, Bayantel says sales may quadruple. But that's still far behind PLDT, with revenues of $1.2 billion. Plans call for an initial public offering of the company by mid-1998, around the time Bayantel expects to turn profitable. "We have established ourselves as a serious player willing to put our cash on the line," says Duffy.
Bayantel has plenty of firepower. It's in the midst of a $1 billion capital-spending program, financed by equity infusions and hefty supplier credits. Much of it is for lines for the gritty Quezon City area of Manila, the heart of its fixed-line business, and a number of smaller cities throughout the island. Bayantel is also lining up suppliers for a $100 million state-of-the-art nationwide fiber-optic network to be operating by 1997. The network will let Bayantel avoid stiff charges levied by PLDT for carrying calls. It will also let it sidestep problems it has had with PLDT not providing enough lines to route calls, which prompted Bayantel to issue customer rebates.
Bayantel has learned a lot from Nynex. The dozen or so New York-based employees seconded to the project urged Bayantel to build a solid fixed-line business to generate traffic for its international service and to keep it from getting hit by price cuts in the cellular and long-distance operations.
Nynex also convinced Bayantel that marketing matters. Although Nynex isn't known for service in the U.S., it has helped Bayantel stand out in a country where the customer often comes last. Quezon City residents have been stunned to see teams of Bayantel employees fanning out through the city's narrow streets to sell phone services door-to-door. Other Bayantel teams staff 700 spanking-new service centers, some of them open around the clock. "With Bayantel, you can walk in and get your line," says Secretary of Socio-Economic Planning Cielito F. Habito, who waited six years for a phone in the bad old days.
It's a striking contrast with the sluggish PLDT, which still lags behind demand for new phones. Although PLDT has launched a plan to get phones to customers in some areas within a month, the wait for a new line can still drag on for years in some areas. PLDT says it welcomes competition from Bayantel and others because it can't keep up with demand--and because it stands to make money from interconnect fees. "They are chasing us, but we are running faster," says a PLDT spokesman. But Bayantel has the money and the savvy to give a good chase.By Mark L. Clifford in ManilaReturn to top