Philippines newcomer Dito seeks $158M in new funds

Starting up is hard to do, especially if you're a new telco challenging deeply entrenched incumbents.

That certainly appears to be the case for Dito Telecommunity, the China Telecom-backed newcomer in the Philippines. On paper at least, Dito looks to have been granted a golden opportunity to disrupt an over-priced duopoly with the vocal backing of the president himself.

Figure 1: Busy busy: With high levels of smartphone penetration, taking on two entrenched incumbents is proving harder than Dito had bargained for.
(Source: Fiona Graham / WorldRemit on Flickr CC2.0)

But it started service eight months late after missing key rollout deadlines, and although it now covers 56% of the population and supports 3.6 million subs, it is going back to investors to raise more cash.

Pass the hat

Listed vehicle Dito CME Holdings Corp. will seek around PHP8 billion ($158 million) from the sale of new stock primarily to fund its network rollout, president Ernesto Alberto told the Inquirer this week.

It's hoping to launch a stock rights offering priced at PHP6.11-PHP7 per share before the end of the year. That's a likely discount on the stock, which closed at PHP6.70 on Thursday. It's been on the slide all year, losing 49% in value as Dito's struggles with the rollout cost, tight schedule and competitive environment take their toll.

Alberto tried to explain the sagging stock price as an industry problem, but in fact both competitors, PLDT and Singtel-invested Globe Telecom, have risen this year. In particular, Globe's share price has made a spectacular 57% gain since January 1.

That's not really because of its core mobile business. It improved mobile revenue by just 1% in the first half, while its 13% rise in profit was mostly a result of covid-related tax concessions.

The rocket under Globe shares is its payments app Gcash, which dominates the local payments market, with 48 million registered users and a threefold increase in transactions this year. With investments in telehealth, online retail, edutech, ecommerce and digital marketing, Globe is becoming an attractive bet on the digital economy.

"Telco will continue to be our main and most important business but we now view ourselves as a digital platform that builds one business upon others," said CEO Ernest Cu in a press release last week.

Clearing the deck

Globe and PLDT have both expressed appreciation for the government efforts to simplify the permitting process, which have allowed them to get basestations built faster than ever.

That is the kind of bureaucratic reforming zeal that brought Dito into the market in the first place. But unfortunately, it's a bigger assist to the incumbents, with their much larger networks and capex budgets.

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Dito, incidentally, is also investing in digital businesses like edutech and big data, but it will be a long time before they impact the bottom line.

Dito CFO Joseph Ong has said that on the current growth rate the company should be within striking distance of profitability "within three to five years," according to the Inquirer.

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— Robert Clark, contributing editor, special to Light Reading