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The Philippine mobile market is a maverick in the region. Despite relatively low income levels, it has a very high penetration rate, ending 2004 at 38%. In addition, the market has undergone consolidation quite early with the two major players gobbling up two smaller players and driving CDMA-based Express Telecom out of the market a year prior to the entry of the new players. Innovative pricing and customer programs have prevented ARPS from plummeting as it has in other markets around the region. The leading players have used bundling and service innovation to compete, rather than pricing. PLDT and Globe became slightly more competitive against each other when DigiTel Philippines began its mobile operations, Sun Cellular, with an ‘all-you-can-eat’ voice and text pricing package in 2003. Things seem to have changed: Globe had a trial launch of its own “all-you-can-eat” pricing package in April. PLDT’s subsidiaries, SMART and PILTEL, have also made trial launches of their all-you-can-eat pricing packages. Globe seems to be rethinking its strategy given early negative results. However, both Sun Cellular and Smart committed to continuing their pricing plans, surely having a negative impact on the overall sector’s revenue growth in 2005.
Sun Cellular’s 24/7 ‘all-you-can-eat’ prepaid package was a first in the market. For US$6.50 (PhP350), the subscriber can send unlimited SMS text messages or make unlimited voice calls to fellow Sun Cellular subscribers for exactly thirty days after the prepaid card has been activated. Pyramid estimates that in its first year of operations, Sun Cellular gained 3.2% market share. Globe had aimed to take a slice of this pie by using its low-end brand, Touch Mobile, to offer an all-you-can-eat plan of US$5.50 (PhP300) for 30 days of unlimited voice calls and SMS to fellow Touch Mobile subscribers
Customers are attracted to flat-rate plans because they make their monthly expenditures predictable. By offering such plans, operators are closing the gates to windfall income or unexpected demand that arises from a slack in customer credit. However, this could be a lucrative position if the operator can set a flat price higher than the expected usage per customer and if the operator has excess capacity in expectation of higher usage. Another danger of the flat-rate voice plans are if network usage balloons beyond the existing network capacity without a proportionate increase in revenues to fuel additional capital expenditure.
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