The Philippine Long Distance Telephone Company (PLDT) was started in the Philippines on November 28, 1928. The Philippines Legislature granted PLDT the franchise to establish and be able to operate telephone services, following the merger of 4 telephone companies under a common US ownership.
It was in 1967 when General Telephone and Electronic Corporation sold PLDT to a group of Filipino businessmen. The Philippine government’s intention to integrate the Philippine telecommunications industry made way for PLDT to purchase the Republic Telephone Company in 1981.
Now, PLDT is the leader in providing telecommunication services in the country. The company’s business can be divided into three main business areas: fixed line, wireless, and information and communication technology.
The fixed line business provides local calls, national and international long distance services, which operates around 2.1 million access lines. The wireless segment provides cellular, satellite, and VSAT services. PLDT provides cellular services through SMART, while Piltel is a reseller of SMART’s digital GSM capacity under its own branding and pricing strategy for both voice and text messaging services.
The information and communication technology provides solutions for internet applications and multimedia content delivery, with use of internet protocol-based solutions. The internet access are provided by Infocom – a subsidiary of ePLDT. And other investees of ePLDT provide e-commerce, call centers, and other IT-related services.
Common shares of PLDT are listed and traded on the Philippine Stock Exchange (PSE). These are also listed and traded on the American Stock Exchange and Pacific Exchange in the US, prior to October 19, 1994. During October 19, 1994, American Depositary Receipts (ADRs), were issued with each American Depositary Share (ADS) that represented one PLDT common share. The ADSs are listed and traded on the New York Stock Exchange and the Pacific Exchange in the US.
II. Statement of the Problem
What actions can PLDT take to sustain their position and maintain their current market?
• To study how the company reached their success
• To identify strategies how the company can maintain the top position
• To suggest ways on how the company can improve existing services to the customers
IV. Areas for Consideration
Owns top position – PLDT owns the top position in the Philippines for the telecoms industry. They initially provided fixed line to the Philippine market during the early times, and have now extended their market for wireless technology. By acquiring SMART as their wireless partner, they became the number 1 provider for wireless phones. As technology continued to boom, then came the internet, which started as dial-up connection and eventually produced the broadband connection, widely known as the DSL. Then came ePLDT, which stood as the technology arm of PLDT. ePLDT gave the answer to internet problems and also took the top position.
Majority of Philippine market share – Having a wide range of products, from fixed line, wireless line, and internet connection, PLDT was able to capture majority of the Philippines market. PLDT holds the Philippine market for fixed line. By taking a gamble of getting SMART during the time when the GSM (Global Service for Mobile Communications) service and cellular market growth was still uncertain, they now earned the market for wireless lines, used of mobile phones, which accounts for 52% of PLDT Group’s revenues. As technology was taking over the public’s attention, PLDT also caught the market in broadband and narrowband internet. They launched the product Vibe for dial-up connections, and DSL for broadband connections.
Industry specialists – With the long history and very vast knowledge in the industry, PLDT has invested on their people. As technology becomes more sophisticated, the company provided trainings to their employees to keep them up to date with the latest technologies and be at par or better than their competitors. PLDT provides training with a trainer and by use of online materials.
National and global coverage – After successfully capturing majority of the market in the Philippines, PLDT decided to go global by expanding their market in Hong Kong. They launched the 1528 Smart to cater for the Filipino people in Hong Kong. This was a partnership of Hong Kong CSL Ltd and PLDT (HK) Ltd. It allows the Filipinos in Hong Kong to access Smart mobile services and content, which includes Smart Money, Smart Load, Smart Pasaload, and Smart Padala – the world’s first text-based remittance service. This also provides a cheaper rate for OFWs when they make long distance calls or send text messages to the Philippines. The cost is much cheaper by as much as 50% as compared to using foreign networks.
Creative marketing strategies – PLDTs marketing proved to be one of the best by continuously coming out with new ideas to capture the Philippine market. Aside from the products that they already sell to customers, they think of ways on how they can satisfy the needs of the people by providing more reasonable and affordable rates and give chance to the less fortunate to experience the new technologies available in the market.
Conquering the mass market – Most of the population in the Philippines represent the masses, so PLDT thought of ways to capture the mass market. With a wide range of products they can offer, they transformed them into smaller forms to make it more affordable to the majority of the public. For the fixed line, they came out with the “Telesulit”, which offered a prepaid version of the fixed line. This enabled PLDT to retain their customers who cannot afford the normal fixed line, and resulted to 33% more fixed line users from a year ago. For the Vibe, the dial-up internet connection service, they also offered a prepaid version, by allowing customers to purchase scratch card that contained the connection details, which only amounted to 100 and allows the customer to use 20 hours of internet. If we calculate it in a per minute basis, it only costs 8 cents per minute. Aside from the prepaid internet offered for the Vibe, it also has what they call the pay-per-surf. Using this kind of package, the customers will only pay for the minutes they use. For the wireless services, SMART introduced the Smart Load, which enabled the prepaid customers to make a reload for as low as 30 pesos (based on 2004 data).
Customer service – When PLDT launched its Vibe and DSL products, which allowed customers to have a faster connection to the internet using broadband, there were a lot of complains regarding the service provided. Much of the complaints were because of the slow connection which didn’t meet the customer’s expectations. And that complaints made or reported were not attended at a reasonable time. This kind of situations may cause customers to decide and change their providers, who they believe are much better in providing the service needed.
Foreign Investments – PLDT is very much exposed to the risk of peso weakness because 98% of its US$2.5 billion is denominated in foreign currency. Around half of the company’s total debt are covered by the US Dollar, which is equivalent to around USD$351 million. The risk of the depreciation of peso is mitigated by the linkage of about 40% of PLDT’s revenues to US dollar. Since about 18% of PLDT’s US dollar linked revenues are from the monthly charges payable by the postpaid fixed line customers, these monthly charges may increase if the peso depreciates.
Venture for new technologies – Ideas of introducing a new technology to the market is a good move, especially if the product is very attracting to the public. People are very much interested for new products that are launched in the market, and how it can add do the current technology they are using. Being the very first to release a new technology will have a good chance of capturing the market sales, therefore increasing in customers and revenue. An example for this is the text messaging for mobile phones.
Dropping prices of PC and laptops – As more and more people are turning into the computer business, it is predicted for prices of PCs and laptops to go down to affordable prices, as other computer manufacturing companies are trying to offer lower cost for these equipments. The more affordable these electronic equipments go, the more people will be willing to purchase one. And as more computers are sold, there will be a bigger demand for broadband service.
Partnership with other establishments – With the internet becoming part of the everyday life nowadays, people are looking for ways to connect to the worldwide web wherever they go – restaurants, hotels, shopping malls, resorts, and other public places. Having a broadband socket or hotspot in place may attract more people in choosing this certain area other than their competitors. This may result for the establishment to gain more customers and at the same time, generate more revenues.
Fixed line market drop – There are predictions that the fixed line market will drop as the future nears. With new communication technologies coming out at a very fast rate, the public are now considering of using those new technologies that offer more comfort and convenience. Even for PLDT, who holds the market for fixed line, may be affected of this drop in sales.
Industry competitors – Presently, there are already different competitors providing the same services as PLDT and SMART have, not to mention other competitors that may still enter the playing field. If one of those competitors will be able to introduce a new product that may interest the public, then there’s a chance that customers will consider having a deal with those competitors.
• Owns top position in the industry
• Majority of Philippine market share
• Industry specialists
• National and global coverage
• Creative market strategies
• Conquering the mass market
• Customer service
• Foreign investments
• Venture for new technologies
• Dropping prices of PCs and laptops
• Partnership with other establishments
• Unstable Economy
• Fixed line market drop prediction
• Industry competitors
PLDT evaluates the short and medium-term threats posed by government instability, adverse economic policy-making, deterioration in the business environment and external shocks.
Risks – PLDT assess explicit short and long-term risks to political stability; latest ratings, rankings and trends for the Philippines’ risk are compared with Asia regional and global averages.
Current Administration and Policy-Making in the Philippines – Threats to the continuity of Philippine economic policy would likely change the business operating environment.
War Threats – Continuous operations of the company may be interrupted due to this factor similar to what happened in 1942-46.
PLDT’s economic forecasts for the Philippines are key assumptions for the global economy covering growth, inflation, employment, trade and investment, interest and exchange rates.
Stability and Exchange Rates – The country’s per capita income has barely grown in the past 21 years. The per capita income of P12,913 in 2003 is only P318 higher than P12,595 in 1980. The value of the peso has depreciated by as much as 1,373 percent against the dollar.
In line with their aim to ensure business stability to meet its debt reduction target, PLDT may be greatly affected when economy fluctuates more so of its balance debt as of 2003 of $2.5 billion dollars.
Competitors – Stiff competion. PLDT’s main competitors are Globe Telecom and Digitel in both the fixed-line and mobile (via Smart’s competition with Globe) markets. Bayan Telecommunications (BayanTel) is also a major fixed-line competitor.
PLDT assesses levels of transparency, flexibility of labor market, tax burden, infrastructure and IT, and trade liberalization in the Philippines
Strain in Making Consumers Need the Product – With PLDT’s diversified services and various products, several marketing strategies be develop in order to impose a greater impact in building the need to want the services and products being offered in the market.
Position a Product That Caters to Various Market Segment – In proportion to Philippines’ demography on income earners, PLDT needs to explore more on areas where possible consumers limits its purchase power to their level of income.
PLDT assesses development on technology, the effects from its these development and cost structure
Fast Technological Change – PLDT is faced with a constant threat of innovation to its products and services to keep up with the fast evolution of technology in order to sustain a competitive advantage in the market.
Demand For Technological Change Would Redefine Cost Structure – Cost is incurred in developing or adapting to new changes in technology.
V. Alternative Course of Action
For our Alternative Courses of Action we present the following:
ACA #1: Improve PLDTs approach customer service
– The company will earn customer loyalty and confidence on their products. Having customer loyalty and confidence, the public will be the one to look for PLDT whenever a new product comes out. The company will not only gain sales through marketing and advertisement, word of mouth from these loyal customers will bring other customers who are new to the company’s product.
– Having a good branding on the public will make it easier for the company to sell their products if they release new ones in the future, because the people will have in mind that whatever they buy from PLDT, they can be sure that there will always be someone to support them in case they encounter any problems.
– Will avoid their existing
– Funds will be needed to hire more people to accommodate the numerous customers needing the service
– Employees who are less performing may be spotted when management looks closely to the performance of each member
ACA #2: Acquire exclusive contracts with different establishments to provide broadband connection or other new products to be introduced, with a reasonable price for customers to pay
– The products of PLDT, like the DSL/broadband internet, can installed in the location of its partners, like hotels, resorts, restaurants, shopping malls, and other places where most of the people usually go. The broadband internet is quickly becoming one of the necessities, especially for working people.
– People who are not yet familiar with PLDT broadband will be introduced to the product. And if the public experiences the fast connection, they may also consider having that at their home. Or change their existing ones to PLDT
– As their product gets known to the people, PLDT will also earn from what is being charged from the customers for the use of broadband
– If the establishment doesn’t give a good impression to the public, then there will be lesser opportunities for the installed broadband to be exposed to the people
– PLDT needs to cash out some money to install the devices in those establishments and make sure that everything is well maintained and secured
– Market for other establishments with existing agreements with other competitors may no longer be available
ACA #3: Introduce new technologies to the market
– PLDT will become the pioneer of the new product to be launched and will get the market for that new technology
– Employees and the company itself will be exposed to new technology and can prepare themselves more for the other technologies to come in the future, as technology evolves from one existing one to a new one
– Money needs to be spent for R&D of new product and also to manufacture the new technology and to market the product
– Spending will also be necessary for training to be conducted to employees on how to handle the new technology
– If the new product launched doesn’t catch the interest of the public, the money spent on research and manufacturing will go waste
– Competitors will quickly think of ideas on how they can produce the same product or similar product with added functionalities
ACA #4: Expanding of its fixed line and broadband network capability, coverage, and services
– PLDT will be able to reach areas where their services are not yet available. With this they further cement their hold on the market by gaining new customers and improving their existing services.
– With longer reach and a bigger share of the market, PLDT’s sustainability will increase. Also by improving existing services, they can maintain their hold on their current customers
– With expansion comes new opportunities and with it comes new jobs for Filipinos. PLDT can rehire those that have been retrenched before or even reach into our country’s pool of top talent.
– A significant amount of resources as well as research and development will be needed in order to achieve discernible results.
– A better monitoring system should be put in place especially since the new areas are a distance away from the mother office in metro manila. Therefore to maintain their outstanding quality certain monitoring practices should be developed.
ACA #5: Setup partnership with computer companies to embed their microchips in laptops
– By tying up with certain computer companies PLDT can have these companies integrate their broadband roaming systems directly into the laptops. This should equate into a moderate profit for the company.
– Cheaper laptops?
– PLDT will have to pick their companies well, as competition is fierce in this industry.
– PLDT will have to devote time and money on developing new technology or improving on existing technology in order to make this happen.
ACA #6: Provide free internet service for public schools and public hospitals
– PLDT will benefit from good publicity and gain positive news coverage, giving their shareholders more confidence and peace of mind.With this also comes an increase in customer loyalty. People will see that PLDT is not heartless company with just profit on their minds.
– By giving public schools access to the internet, With the breadth of information available on it, PLDT is providing for a now increasing need for e-learning. Further improving the Philippine Public school system in the process.
– Yet again a significant amount of funding will be needed, depending on the number of computers to be bought, not to mention the resources they are going to eat up by providing these public schools with free internet access.
Philippine Long Distance Telephone Company (PLDT), together with SMART, is currently the country’s leader in the telecoms industry. Although that’s the case now, we may never know when one of their competitors will suddenly go pass them, or when a new competitor will come in to play. Without proper and well-planned short-term and long-term strategies, the company could lose its position in the market.
As with their current products, they are currently the leader. But PLDT should not just reply on what products they have now or the scope of market they have. PLDT should also consider widening their span of customers. Having more opportunities of getting more customers to buy their products, the more they have the chance to make their profits grow. When they earn much more, the company will be able to plan for more programs or projects to promote to the public. These new projects may result to more expansion or introduction of new products that may capture the public’s attention.
In order to continue and secure their market position, PLDT would need to make the necessary means to make their customers always satisfied with their products and the services that they provide.
The group ultimately believes that in order for PLDT to thrive in the competitive world of telecoms, they must focus on 3 main aspects of the business: customer service/logistics improvement (ACA #1), new technology introduction (ACA #3) and expansion of current products (ACA#4).
The most important of the ACAs chosen is ACA#1. Before the company can even do expansions or introduce new products, they should first evaluate and improve their current customer service. Customers will not continue with deals with PLDT if they don’t get enough support in cases they encounter problems with their products. To get retain the loyalty of the customers, the company should provide a better quality of service.
When the customer service (ACA#1) is stable, PLDT can now focus on doing ACA#4 – expansion of current products. We believe that PLDT has not penetrated most areas in the country for their broadband services. With the ongoing positive trend for broadband, they should explore untapped markets and regions to generate more profit and sustain their leadership in the telecom industry. This move can give PLDT more customers from other provinces of the Philippines. But it is important for PLDT to put up a strong infrastructure of expansion, as not to get bad criticisms, especially from the new customers.
In time, PLDT can also consider offering an edge over the others and bring customer satisfaction to a new level by improving their customers’ experience and offering something new (ACA#3). People of this generation are very much interested in new products and technologies. They always thrive for new things and ideas that can help make their lives easier. Being the 1st one to introduce something in the Philippines will help them catch majority of the market.
But in implementing these recommendations, PLDT should consider their budget. They should plan every idea carefully, that they will have proper funding to complete the whole project. The company should look at all possible options and risks that may negatively affect them, before finalizing any decisions.
VII. Implementation Plan
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