MOBILE PHONE WAR

The National Telecommunications Commission (NTC) called for an emergency meeting last Feb 7 among the top officials of cellular phone service companies Globe, Smart and Sun Cellular in an apparent bid to avert a war over Sun’s marketing strategy.

At the meeting arranged by NTC Chairman Ronald Solis were Innove president Gil Genio, representing Globe Telecoms; Smart Communications chief executive officer Norberto Nazareno, and Sun CEO Lance Gokongwei and his uncle, Digitel director James Go.

The closed-door meeting started at 3 p.m. and was still ongoing by 7 p.m., when Solis reportedly had food sent into his office at the NTC headquarters in Quezon City.

Solis called the meeting after news broke out that Globe and Smart, through their subsidiaries — Innove and Piltel, respectively — filed petitions with the NTC asking the commission to issue a cease-and-desist order against Sun’s "24/7" service, which offers unlimited calls and texting among Sun-to-Sun subscribers per month for an additional P250 for pre-paid and post-paid subscribers.

The service allows subscribers unlimited local Sun-to-Sun calls and texts. Post-paid plan holders can subscribe to the service by paying a minimum fee of P250 every month on top of their current plans while pre-paid subscribers can load P100 valid for 10 days and load option of P250 valid for 30 days.

Innove and Piltel claimed Sun was practicing "predatory" or cut-throat competition pricing in offering the "24/7" service.

The complainants wanted the NTC to set all call rates at P5.50 per minute and bar Sun Cellular from charging much lower rates. Globe and Smart currently charge roughly P4.50 per minute.

The service, originally offered as a promotional campaign by Sun, was made permanent following its success in luring thousands of new customers. The promo has been popular among college students and low-income consumers.

The success of Sun’s "24/7" service drove the company’s subscriber base to 1.1 million as of end-December last year.

In its complaint, Globe’s Innove claimed Sun had employed "predatory pricing" in its promotional gimmick, branding it as "an anti-competitive measure employed by a dominant company to get/protect market share from new or existing competitors."

For its part, Smart’s Piltel said that its rehabilitation program was compromised by Sun’s 24/7 service due to the "unwarranted action of Digitel in importing rates arbitrarily."

Sun Cellular is the trade name of Digitel Mobile Philippines Inc., a unit of listed Digital Telecommunications Phils. Inc., owned by tycoon John Gokongwei.

Digitel’s 24/7 plan, according to Piltel, was destroying the "fundamental or basic market pricing considerations when it has priced its service at a level where no new market entrants in the cellular market can still compete, and that any losses Digitel may incur at the moment may be recovered later on when it has severely weakened its competitors and successfully driven them out of the market."

Piltel claimed Sun’s pricing scheme threatens its viability in the already crowded cellular market.

"Digitel charges Piltel a wholesale rate of P4.50 per minute access charge to its network, while its own subscribers have an unlimited retail access to its own network at P250 a month, or P100 every 10 days," Piltel said.

"Piltel by itself is charging its subscribers an average retail P5.50 per minute and has not embarked on an atrocious wholesale pricing scheme," the firm added.

Analysts noted the net additions of both cellular phone companies suffered due to marketing efforts of Sun Cellular which attracted a substantial number of new users due to its unlimited call and short messaging services for additional fees on top of a subscriber’s prepaid load or postpaid plan.

Smart and Globe are the two dominant cellular firms with more than 95 percent of the market.

Compared to these two giants, Sun Cellular is a very small competitor with less than five percent of the market, Digitel officials said.

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As of Friday 6pm Feb 11, 2005, TV Patrol annouced that NTC did not allow suspension of 24/7 promo by Sun, the next hearing for the case is scheduled on March 7, 2005