From keypads to touch screens

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By Manuel V. Pangilinan (Remarks delivered at the 2012 PLDT Annual Stockholders Meeting at Dusit Thani Hotel in Makati City on Thursday, June 14.) Allow me to focus my brief remarks this afternoon on three points. First, let?s take a look at what PLDT has accomplished since the completion of its investment in Digitel in October last year, and what more remains to be done in order to create the greatest possible value out of this transaction for PLDT, the industry and the country. Second, I shall provide you an update regarding the other significant investments that we are undertaking in order to ensure PLDT?s continued leadership and prosperity far into the future. I refer specifically to the ongoing massive modernization of our fixed and mobile networks, and, the far-reaching reorganization of our business units in order to make them much more customer-focused. Third, we?ll discuss what to expect for the balance of this year, and, the shape of things to come for PLDT and the rest of the industry in the next few years. Let me start with Digitel. I am happy to report that we have begun to deliver on our commitments with respect to the Digitel transaction. If you recall there were much-publicized fears that our investment in Digitel would harm consumer interests. In response, we provided firm assurances that this transaction would result in significant benefits for consumers, particularly for the 16 million fixed and mobile customers of Digitel and its mobile subsidiary, Sun Cellular. And that has indeed begun to happen. With the assistance of PLDT and Smart, for example, Sun cellular has been improving its mobile phone coverage much faster and more extensively than would otherwise have been possible. This process started in Mindanao, where Sun has strengthened its signal in areas like the provinces of Lanao Norte and Sur, Basilan, Camiguin, Tawi-Tawi, Sulu, Bukidnon, Compostella Valley and Davao del Sur. Then, Sun widened its reach in Luzon, particularly the Cordillera provinces of Benguet, Ifugao, Kalinga, Apayao, and Mountain Province and the Northern and Central Luzon provinces of Isabela, Nueva Ecija, Nueva Vizcaya, Aurora and Quirino. It has also improved its signal in the Visayan islands of Panay and Bohol. And this is just the start. At the same time, as we assured the public and our regulators, Sun Cellular continues to offer its signature unlimited call and text services. It has also started introducing new high-value products. For example, Sun has introduced new postpaid plans such as the Plan 250 and the Corporate Plan 199, initially in Mindanao and then later in other parts of the country. As a result of these initiatives, Sun Cellular has raised its net service revenues by a robust 17 percent in the first quarter of 2012 versus a year ago. The advance was led by its postpaid business, which grew revenues by 21 percent and subscriber numbers by 26 percent. Moving forward, we shall maximize the synergies among PLDT, Smart, Digitel and Sun so that we can raise the performance level of the entire group. We?ve already scored some quick wins. For example, we have rationalized the group?s network roll-out by minimizing duplication. As a result, we have reduced capital expenditures by about 8 billion pesos even as we expand the reach and strengthen the capabilities and resiliency of all our networks. Next, our intention is to leverage on the combined capabilities of the group?s network infrastructure in order to deliver even better services to customers. Which brings me to the next point of my presentation: our network modernization program. At this point, it is worthwhile to underscore how far ahead of the field the PLDT group is in terms of modernizing its fixed and mobile networks. Let me highlight just a few aspects of our program. By the end of this month, we will have completed the process of installing in every single cell site of Smart, all over the country, a new generation of base station equipment. This enables us to quickly upgrade to the latest mobile phone technologies such as HSPA+ and LTE, as and when our plans and market demand require. Other telcos have only just begun this process. Within this year, we shall have upgraded our transport network with over 54,000 kilometers of fiber optic cable assets that will enable us to carry up to 10 times more data than before. No one else comes close to this level of capacity for handling the rapidly growing traffic in voice, SMS, and data services. This is also supported by our enhanced international cable links, for which we are installing a third and fourth cable landing station. By year-end, we shall also have upgraded our core networks and backroom facilities for both fixed and mobile. As a result, we shall have more network intelligence to efficiently manage our various services and thus offer our customers more flexible and attractive service packages. Finally, we are also rolling out new data centers in different parts of the country to support our move into offering cloud services that will be of growing importance to both businesses and individuals in the coming years. All this requires an investment of about 38 billion pesos this year, which will bring the total bill for our modernization program to about 67 billion pesos. To ensure that this investment will bring better value to our customers and higher returns to our company, we have reorganized our business units to directly address key market segments. These markets are those for the individual consumer, the home, the enterprise market ? both large and small, and, international, which includes the roughly 10 million Filipinos overseas. Take note that these business units are increasingly able to tap the combined resources of PLDT, Smart, Digitel and Sun in order to offer our customers the richest range of products and services that best meet their needs and aspirations at different price points and service quality levels. It will take, however, a little time for all these initiatives to bear fruit. The Digitel transaction for instance was delayed, pushing back as well the full realization of its benefits. That is why I refer to 2012 as ?the year of alignment? and why we have tempered our expectations for this period. Our guidance for core income in 2012 for example remains at 37 billion pesos, which is lower than those of previous years. Our numbers for the first quarter indicate that we shall attain the target core income for 2012. Moving forward, we expect to get PLDT back on the growth path in 2013 and then return to previous levels of core income in the coming years. Which brings me to my final point: a few words about the possible scenarios in the next few years. We expect the industry to remain very competitive. More so, given that competition will come not only from telcos ? both existing and new ones. It will also take the form of services offered by the ?over the top? players of the internet world like Facebook, Google and Apple that directly compete with our traditional services. The radical changes that digital technologies are bringing to the telecoms industry will become more pervasive and profound in the next few years. Indeed, these forces are changing the face of communications ? from keypads and keyboards to touch screens of various sizes. Increasingly, people are communicating with each other through smartphones, tablets, laptops and smart TVs. From voice and text, connections ? whether wired or wireless ? are becoming broadband and multi-media. In five years, the market will, in growing numbers, be populated by ?digital natives? ? young people who have grown up with mobile phones, Facebook, Twitter and YouTube. Haven?t you seen two- or three-year old children, playing effortlessly with the iPads of their parents? These individuals will have very different habits, behavior and expectations. And they will live connected lives, taking for granted having always-on links to the continuously expanding world of services available on the Internet. By making the huge investments I have just spoken of ? in Digitel, in our networks and in our organization, we have placed PLDT in the best possible position to compete and thrive in the emerging world of digital natives. Leadership in technology is fundamental in achieving success in the years to come. But we are keenly aware that this must be combined with an intimate understanding of our customers. And the ability to create and provide the products and services that they desire. This isn?t just a battle of gadgets and networks. At the end, the question is: who is closest to the customer and can serve him best? Thus, the PLDT of the emerging digital future will be one of many touch screens. We shall offer and support a wide range of services beyond basic communications. We will help people enjoy entertainment, use financial services, manage their energy needs at home and office, take care of their health, among many others. Working with affiliated companies such as Meralco and Maynilad and other partners, we shall help provide people the tools with which they can live safe, productive, enjoyable and connected lives. That is our objective. That is our commitment. ]]>

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