by Alecks P. Pabico

THE STRENGTHENING of the peso notwithstanding, businesses remain in doldrums, and may not be picking up anytime soon. But there are no glum faces in the local telecommunications industry, which has been experiencing boom times in the last two years even as other sectors were going bust. Led by cellular-phone providers, this services subsector proved to be the only other strong performer besides agriculture in 2001, and expectations are things are just going to get better for it, at least in the short term.

Thank the country's cell phone addicts for that. Or more precisely, the text freaks. Indeed, text messaging via the short message service (SMS) of cellular phones seems to have replaced basketball as the country's national pastime, and surveys now say Filipinos are the heaviest users of SMS in Asia, if not the entire world. These texters have transformed what is really a low-tech, low-bandwidth, digital communication solution into the key to riches of leading mobile phone operators Smart Communications, a wholly owned subsidiary of telecom giant Philippine Long Distance Telephone Company (PLDT), and Globe Telecom.

Actually, the mergers and acquisitions of recent years have reduced the mobile phone industry from a five-operator affair to what is effectively a duopoly. Today, PLDT's Smart and Piltel (Pilipino Telephone Co.) control 56 percent of the mobile-phone market while Globe, which acquired Isla Communications, Inc. (Islacom) middle of last year, gets 42 percent. The remaining two percent goes to struggling analog provider Express Telecommunications Co. (Extelcom).

But before texting came along, PLDT seemed already resigned to wallow for some time in the red. It was texting that finally rescued PLDT from the pits, enabling it to triple its profits last year. Smart accounted for most of the revenues, raking in P3.9 billion in profits compared to a net loss of P406 million in 2000. Smart's operating revenues in 2001 ballooned to P24 billion, a 70-percent increase from the previous year's.

In contrast, Globe, a joint undertaking of the country's own Ayala Corporation, Singapore Telecom, and Deutsche Telekom, has always turned a profit, having pioneered the use of a fully digital network based on GSM (global system for mobile communications) technology, which has since become the de facto standard in the country. The firm posted P4.3 billion in net income in 2001, up by 56 percent from P1.5 billion the previous year. Like Smart, it says its main source of income is its voice service, but its SMS-related services are obvious moneymakers as well.

And how. Neither Globe nor Smart can deny that with the sheer volume of SMS traffic—an average of 100 to 120 million text messages sent each day by close to 11 million subscribers—cell phone companies are tapping at an immensely lucrative revenue stream. Even if the basic charge per 160-alphanumeric-character message is just P1 (or two U.S. cents), which is said to be one of the lowest rates in the world, the volume of text has resulted in Globe and Smart swimming in money.

"There are over half-a-billion GSM users all over the world. We account for 10 to 15 percent of text traffic but only two percent of the global subscriber base. I don't know of any country that sends out as many text messages as we do on a per capita basis," says Smart public affairs chief Ramon Isberto.

Smart says its system alone handled 12 billion outbound messages last year, a 219- percent increase from 3.8 billion messages in 2000. This despite recent moves by the telcos themselves that effectively reduced free text allocations by more than 60 percent.

Both Smart and Globe acknowledge the heavy contribution of wireless data services, which include SMS, to operating revenues they realized last year. For Smart, SMS-related services alone—from simple text messages, ring tones, and phone logos to mobile banking and enhanced personalized services provided by subscription to Smart Zed -accounted for 31 percent of wireless revenues, generating P7.6 billion or a 216-percent increase from P2.4 billion in 2000. Ordinary SMS contributed P6.2 billion or 81 percent of revenues.

This is on top of the P1.5 billion Smart got from facility-service fees from sister company Piltel for the use of its network for the latter's "Talk 'N Text" service, as well as P1.3 billion more in interconnection income from SMS traffic of non-subscribers.

For Globe, wireless data services organized into its branded portal, myGlobe, offering ring tones, icons, games, and other content brought in P6.3 billion (up by 73 percent from P2.7 billion) or 27 percent of its wireless net service revenues.

The texting phenomenon has also prompted both wireless providers to launch their respective landline text services to allow landline subscribers to access information and receive and send messages to cell phone users. Globe was the first to offer such service via 1-900-TXT in February 2001. PLDT followed shortly with TXT 135 and saw more than 100,000 customers (over five percent of 1.9 million subscribers) activate the service last year. By its estimates, a monthly average of 750,000 text messages were sent out in its initial months.

But it was Smart specifically that shared the limelight with Globe last year in the regional newsmagazine Far Eastern Economic Review's annual list of top Philippine companies. Globe came in sixth, while Smart was No. 9 (up from 10). Globe also improved its credit rating with the global independent financial analyst Standard & Poor's last year as it got upgraded twice.