Talks of a wireless joint venture between beer giant San Miguel Corporation and Australia’s biggest phone and Internet company Telstra have broken down, as the two parties have conceded that they are no longer forming a third telecom operator in the Philippines, where Internet connectivity is notoriously slow and expensive, not to mention controlled by two large conglomerates, PLDT and Globe Telecom.
SMC president and COO Ramon Ang yesterday told the Philippine Daily Inquirer that SMC and Telstra have “agreed that we can no longer continue with the talks” despite working around the clock to “resolve some issues.” Ang said the local conglomerate would continue to push through with its plans to launch an affordable and high-speed Internet service, regardless of whether it finds a new investor to take Telstra’s place.
In a separate report by The Australian, Telstra chief Andrew Penn confirmed the latest development to what has been one of the biggest tech stories in the Philippines of last year.
“While this opportunity is strategically attractive, and we have great respect for San Miguel Corporation and its president Mr. [Ramon] Ang, it was obviously crucial that the commercial arrangements achieved the right risk-reward balance for all involved,” Penn said. It was previously reported that Telstra was looking to spend up to $US1 billion for proposed mobile plans in the country.
Telstra, for its part, has offered to provide infrastructure-related assistance and consultancy support to SMC and will continue to pursue growth opportunities in Asia. The latter has gained considerable momentum since the Australian carrier acquired submarine communications network Pacnet in 2015 for $US697 million.
The latest State of the Internet report by U.S.-based online content and network firm Akamai reveals that the Philippines has the second-worst average download speed (2.8Mbps) in the Asia-Pacific region, besting only India. By comparison, top-ranked South Korea averaged a speed of 20.5Mbps.
We can’t say we’re surprised to hear that negotiations have sputtered and came to a halt Sunday, leaving a trail of disappointment and unmet expectations. Anyone who has been following this story since it broke could see the writing on the wall, and Telstra must not have liked what it saw.
The skyrocketing estimates of offering affordable, reliable, and high-speed Internet service in an archipelago; the increasingly louder call to reallocate the much-sought-after 700MHz wireless frequency, which is currently mostly held by Liberty Telecom, a subsidiary of San Miguel Corporation; SMC’s failed attempt at making a dent in the local telecoms industry with Wi-Tribe — you can take your pick between these red flags, but there are other concerns.
But the bottomline is the arrival of a third force in the Philippines’ telecom market has been pushed back indefinitely, which means the long-suffering customers of existing telcos will continue to have little to no choice for quality mobile and broadband service.
Below is a copy of Telstra’s press release regarding the failed joint venture.
Negotiations ended on Philippines wireless joint venture
Telstra and San Miguel Corporation have been unable to reach commercial arrangements on a possible equity investment in a wireless joint venture in the Philippines and negotiations have therefore ceased.
Telstra Chief Executive Officer Andrew Penn today said the organisations had agreed at the weekend to bring negotiations to an end.
“Despite an enormous amount of effort and goodwill on all sides, we were simply unable to come to commercial arrangements that would have enabled us all to proceed,” Mr Penn said.
“While this opportunity is strategically attractive, and we have great respect for San Miguel Corporation and its President Mr Ang, it was obviously crucial that the commercial arrangements achieved the right risk-reward balance for all involved.”
Telstra has offered to continue technical network design and construction consultancy support to San Miguel Corporation, should those services be required.
“We continue to pursue growth opportunities in Asia consistent with our strategy. Following our April 2015 acquisition of Pacnet, Telstra is now one of the largest connectivity providers in Asia,” Mr Penn said.
“Our investment decisions will be guided by our capital management framework. Investments remain an important part of our future to ensure sustainable growth in earnings and shareholder returns over time.”
Telstra last year confirmed it had been negotiating a possible joint venture with San Miguel Corporation and envisaged investing up to USD$1 billion should the joint venture proceed.
[irp posts=”7566" name=”Singapore, S. Korea dominate 4G LTE rankings, Philippines struggles”]
Trade war: How the US played its trump card wrong
The dragon is no longer sleeping
The US and China are embroiled in a trade war and the last few months have witnessed unprecedented escalation from both sides. Tensions between the two countries are ongoing and virtually two power blocs have been created. The conflict has also changed everyone’s outlook on technology forever.
US President Donald Trump banned American companies from working with Huawei, one of China’s largest technology companies. This meant Huawei could no longer use American technology, including Android. Thankfully, an interim resolution lets Huawei transact with American counterparts right now.
However, this was a blaring reminder for China. It depends too much on the US for technology and this needs to end. For two power blocs, interdependence isn’t an option. And the US played its trump card at the wrong time, in a wrong way.
Trade war affecting free flow of tech
Technology has been freely flowing since the inception of the Internet. Everyone has been connected to a neutral medium of communication except for a few countries. The flow of information has been so fast, yet transparent. Adding to this, open-source has been a boon for everyone since technology is never restricted and everyone gets a chance to experience it.
Even if a service or product is proprietary, companies have been quick to monetize it via licensing. There are apps that are built in one country and used by citizens of another country that’s thousands of miles away. In a nutshell, we’ve always imagined modern or digital technology to be easily transferable.
But, the US proved it can stop this flow of sanctions or bans, only to reverse the decision. We can call this saber-rattling. They wanted to serve a warning and the message has been received. However, China also realized one thing, it needs to become truly independent.
The Chinese internet is different from the rest of the world’s internet. It’s guarded by a nation-wide firewall and heavily censored by the state. A few services like Google and Facebook aren’t available. This has already made way for homegrown alternatives like Baidu, Weibo, and WeChat.
Now, Huawei is gearing up for the worst. It accelerated work on its own operating system, HarmonyOS. It’s expected to roll-out slowly in the coming quarters. In a bid to challenge Google Maps, they’re also planning to unveil a mapping service known as Map Kit.
Every Chinese company would be scrambling to create a backup plan, preparing for the worst. In the short term, they’ll suffer due to sudden shortcomings. But in the longer run, the US loses its leverage.
The ban is bad for progress
The US government’s ban on Huawei is ill-timed. The company is a leader in 5G deployment due to its patents and manufacturing ability. The world needs Huawei to effectively deploy the next standard of wireless communication. If the US wants its allies to avoid Huawei, alternatives need to be available, and that’s not the case.
Even US companies aren’t very fond of getting dragged in the trade war. Trump agreed that tariffs on China will hamper Apple’s ability to compete with Samsung. Not to forget all the revenue US companies lose after sanctions are applied or the Chinese develop their own alternative.
Other countries also have only two options — get in line with the US or develop its own cushion. A territorial divide has also prompted countries like India to lobby for data localization. In case relations turn sour tomorrow, how much control do you want to give others?
These questions and hypothetical scenarios are often considered to be an exaggeration. And I don’t blame them. But the US could’ve used this trump card later, actually benefiting from it.
Trade War: China’s loss is everyone’s gain
The flow of technology remains untouched
Trade tensions between the U.S. and China have reached a stage where hostility has become a new normal. Both countries have imposed high tariffs on a substantial proportion of each other’s goods and just when we thought the war is de-escalating, President Trump announced 10 percent tariffs on a further US$ 300 billion worth of Chinese goods.
It’s not surprising that China’s technology muscle is independent to a huge extent. The country is the world’s number one smartphone maker in terms of volume, almost every company on this planet relies on components that are made in China, and giants like Baidu, Tencent, and Alibaba offer everything to the end-user.
Sure, Chinese technology giants still rely on a huge chunk of western technology and we’ve already seen how Huawei took the biggest hit. But, while all of us are busy analyzing and understanding the trade war, other countries are making moves, and they’re making them fast.
Other countries swooping in
It’s a classic story of two cats fighting for a piece of cake and a monkey swoops in, fooling both of them. The two incumbents gain nothing in the end and a third-person reap all the benefits. Obviously, a literal translation would be an exaggeration, but we’re seeing a similar anomaly with the Trade War.
According to the U.S Census Bureau, Chinese imports have dropped by US$ 31 billion in the first half of 2019. But, Southeast Asian countries like Vietnam, India, and South Korea have successfully bridged the gap. Vietnamese imports to the U.S increased by a whopping US$ 7.6 billion, followed by South Korea at US$ 3.8 billion and India at US$ 2.7 billion.
These records are a combined figure of all imports and not just limited to technology products and services. But, the tides are changing massively in this industry as well.
Companies are uncertain about their long-term investments in China and are looking for alternatives. Samsung and Intel were looking for safer options for years and currently employ 182,000 workers in Vietnam. These factories assemble smartphones, processors, and almost every component one needs.
According to Bloomberg, the Vietnamese government allowed investment licenses to 1,720 projects in the first half of 2019. Nintendo has decided to shift its Switch production to Vietnam and even Sharp has announced relocation plans.
Foxconn, the maker of iPhones in China has bought a land parcel in Vietnam and announced a US$ 200 million investment in India. Apple, in partnership with Wistron India and Foxconn, is already making iPhones in the country and recently top-of-the-line models were also being shipped out.
Samsung already has the world’s largest mobile phone factory in India that assembles top-tier variants, ready for export. While the quantity is negligible when compared to China’s output, these small steps are an indication that China is slowly losing its edge.
China is giving away cash incentives for new Huawei users
Market share soars in China
It’s no surprise that Huawei is in dire straits. For over a year, the American government has hounded the company night and day. Huawei’s situation in the US is tenuous at best. Naturally, whereas the US is hostile territory, Huawei likely enjoys a warmer reception in its homeland, China.
Now, a new Canalys report has confirmed Huawei’s success in China. According to the report, Huawei’s Chinese market share skyrocketed to 38 percent in the second quarter of 2019. (For reference, Apple — the closest American competitor — is only at 6 percent.) Almost a year ago, Huawei peaked at only 25 percent. Since then, Huawei’s success has climbed consistently.
Somewhat unsurprisingly, Huawei’s success isn’t a purely natural phenomenon. According to the same report, Chinese corporations have started giving away cash incentives for new Huawei users. For example, Xinye Lubricating Oil is offering CNY 500 to employees who switch from an iPhone to a new Huawei device. Similarly, Changsa’s Days Hotel & Suites branch is giving away CNY 200 for employees who use Huawei phones.
Obviously, these corporate pushes are stemming from a renewed patriotism in support of Huawei’s international problems. “As a patriotic company, our company strongly supports domestic brands,” Xinye Lubricating Oil said in a statement.
Unlike foreign countries, China isn’t worried about the mass hysteria surrounding Huawei’s products. For one, the potential loss of Android support doesn’t faze the country. China often relies on its own operating systems and app stores. If anything, Huawei is enjoying a resurgence in support, thanks to Trump’s prolonged trade war.
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