August 27, 2014

Court stops text refund

Various news agencies reported over the weekend that the Court of Appeals has issued a 60-day restraining order on the National Telecommunications Commission (NTC) from enforcing its directive for a P7b refund and reduced text messaging fees.

The NTC has earlier issued the order, claiming that mobile phone companies overcharged their customers for short-messaging services (SMS) after interconnection charges were cut from P0.35 to P0.15 for each SMS. The court took note of the argument of Digitel Mobile Phils Inc (operator of the Sun Cellular brand under the PLDT group) that interconnection charges make up just a portion of SMS prices. It also recognized the telco’s difficulty of ascertaining the subscribers entitled to any refund given that most of the company’s subscribers are on prepaid plans.

Our take: We view this as a positive news flow for listed telecom companies PLDT (which operates the Smart, TalkNText and Sun brands) and Globe Telecom (which operates the Globe and Touch Mobile brands). These companies earlier argued that SMS is a value-added service and should not be regulated. The NTC’s goal to cut SMS prices has also been rendered moot by the introduction of bucket or unlimited plans which basically commoditized SMS. – WealthSec