Last Published: 7/18/2019: Information Technology (IT)

Last Published: 7/18/2019
Overview
The Philippine Government has identified better connectivity and promoting
ease of doing business among its priorities. President Rodrigo Duterte has
repeatedly reminded Government officials and the private sector about
improving their services. He instructed the search for a third telecom operator
to address the duopoly between the Philippine Long-Distance Telephone
Company (PLDT) and Globe Telecom. On May 2018, President Duterte
signed Republic Act (RA) No. 11032 or the Ease of Doing Business and
Efficient Government Service Delivery Act. This law aims to streamline
government procedures and services and solve what President Duterte calls
“the perennial problem of red tape”. RA 11032 was crafted to attract more
foreign investments to the Philippines and to fast-track the establishment of
new businesses. These developments are expected to boost investments in
information technology products and services and capital expenditure for
telecommunications networks.
Information Technology (IT)

The Philippines IT spending is forecasted to reach US$5.1 billion in 2019 and
US$8.1 by 2023, with an estimated 12.1 percent annual growth rate during
this period. These figures from Business Monitor International (BMI) breaks
down the IT industry into three segments: computer hardware sales, software
sales, and IT services.
Estimated 2019 hardware sales for the Philippines is at US$1.9 billion, with
annual growth rate of 5.8 percent to reach US$2.4 billion in 2023. The 5.8
percent annual growth rate is slower than originally expected and this is
because the Philippine consumer is more inclined to invest on a smartphone
first as opposed to a PC. Growth of tablets is slower because they are
considered as comparable to a smartphone in functionality, but higher in
cost. Acer, Lenovo and Asus are the top PC brands in the Philippines for
2018. They are more affordable compared to U.S. brands Dell and
HP. Apple is a popular premium brand but market share for Mac desktop and
notebook remains low due to the price sensitivity of the market. Printer and
copier demand are on a downward trend given the reliance on smartphones
and movement away from paper-based processes. A more positive trend is
expected for servers and storage as small and medium enterprises are
projected to automate, and larger companies to modernize their systems and
expand their computing capacity.
There is a growing demand for automation across sectors and this will lead to
robust opportunities for software and services. Software sales for 2019 is
estimated at US$694 million, with an 18.2 percent annual growth to reach
US$1.4 billion by 2023. Efforts to modernize from both the private and public
sectors will spur demand for software. IT services such as training,
customization, consulting, and maintenance is expected to hit US$2.8 billion
in 2019 and expand by 14.4 percent per annum to reach US$4.8 billion in
2023. Migration to cloud services and cybersecurity solutions are technology
trends that are expected to have the most positive impact on IT services.
The Philippines growing middle class and young population are important
drivers of IT demand because their spending levels on technology products
are on an upward trajectory and it is benefitting premium
brands. Infrastructure investments in the Philippines is seen as another
source of opportunity. The road, railway, airport, bridge, and port systems
that are being built will require, at a minimum, design software, building
information modeling (BIM) for better project management, and file sharing
applications. These will drive demand for hardware, software and services.
The Philippine Government, the business process outsourcing (BPO) industry,

the financial sector, and the telecommunications industry are key vertical
markets for IT. The Philippine Government showed its strong support for the
industry by establishing its own Department of Information and
Communications Technology (DICT) in 2016. Details on the DICT’s projects
are listed under “Opportunities”. The BPO industry currently employs 1.8
million and has large companies like Citi, JP Morgan, HSBC, and Accenture
with offices in the Philippines. The BPO industry is not only a large employer
but is also a major consumer of hardware, software and services. The
financial services industry is a major customer for automation and security
services to support its online services. All the Philippines’ universal banks
provide online services and transactions. The telecom industry is dependent
on IT hardware, software and services to operate networks and to interface
with customers. A discussion on the Philippines telecommunications industry
is provided below.
Telecommunications
The Philippines telecommunications industry is at a significant point in its
history since its deregulation in the late 90’s. The industry saw mergers and
acquisitions in the early 2000’s that resulted to the duopoly of the Philippine
Long-Distance Telephone Company (PLDT) and Globe Telecom. Below is a
table showing the breakdown of mobile and broadband subscribers from
Globe and PLDT, as of December 2018:
The Philippines information communications technology (ICT) industry has

significant growth potential given increased public and private investments,
upward consumer spending, and demand for better services that can be
addressed through improved infrastructure and automation.
GLOBE TELECOM[1] PLDT[2]

Mobile Subscribers 74.1 million 60.5 million
(71.5 million pre-paid / (58.2 million pre-paid /
2.6 million postpaid) 2.3 million postpaid)
Broadband Subscribers 1.6 million 2.1 million
Apart from consolidation, the early 2000’s also saw the rise of Chinese
telecommunications equipment providers. The DICT has indicated that the
Philippine telecommunications network is about 80 percent reliant on Chinese
telecom equipment led by Huawei and ZTE. U.S. telecom equipment
providers found it difficult to compete against the aggressive financing
packages of their Chinese competitors.
President Duterte highlighted the need for better telecom services in 2016 and
mentioned that he would like a third telecom carrier to operate in the
country. The President blamed the duopoly for the country’s poor telecom
services, and slow internet speed. The DICT published Memorandum
Circular 09-09-2018, the Terms of Reference for the Bidding for the Third
Major
Telecommunications Provider on September 21, 2018, and the opening of

bids took place on November 7, 2018. The highest committed level of service
(HCLoS) selection model was adopted for the bidding with three selection
criteria: national population coverage (40 percent), minimum average
broadband speed (25 percent) and annual capital and operational
expenditures (35 percent).

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Last Published: 7/18/2019: Information Technology (IT)

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Last Published: 7/18/2019

Information Technology (IT)

The Philippine Government, the business process outsourcing (BPO) industry,

The Philippines information communications technology (ICT) industry has

GLOBE TELECOM[1] PLDT[2]

Telecommunications Provider on September 21, 2018, and the opening of

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