How the Philippines became an SMS nation

Alastair McIndoe
The Straits Times
Publication Date: 22-08-2009

Sari-sari stores are found on practically every street in the Philippines.

Today, over 60 per cent of the population of 90 million use mobile phones, according to industry estimates. And that rapid growth is reaching ever further down the social pyramid, where around a third of Filipinos live on a dollar or less a day.

These hole-in-the-wall grocery shops are an iconic image of the country, just like the jeepney, postcard-pretty beaches and lechon, a tasty roasted suckling pig.

At these stores, Filipinos on tight budgets buy small amounts of everyday household items, such as finger-size portions of cooking oil and vinegar or single sachets of shampoo and washing powder. Cigarettes and boiled sweets are sold by the tingi or piece.

When the same concept was applied to electronic SIM card top-ups for pre-paid mobile phones, it made the technology affordable even to the very poor.

This would not have been possible unless there was a thriving market for used mobile phones, of course. But a handset can cost just 500 pesos ($15) here.

While Filipinos seem to be using their mobile phones less in these tough economic times, telephone companies are reporting rising subscriber numbers for their cellular services, with the growth being driven by the mass market.

In Manila's teeming Guadalupe Nuevo market, 32-year-old Dario Ferrer, who sells buko - the juice of young coconut - from a wooden handcart, slides a 20-peso note under the chicken-wire grill of a sari-sari store and tells the owner his mobile phone number.

Moments later, the ping of a text message on his handset confirms the top-up.

Every other day, he sends a text message to a wholesaler in the provinces to place an order for fresh green coconuts. The message, one of an estimated two billion sent every day in the Philippines, costs one peso, or three Singapore cents.

"Previously, I had to order using a public payphone to make expensive national long-distance calls to my supplier," said Mr Ferrer.

Sari-sari stores - and there are an estimated 700,000 of them across the Philippines; one for every 130 Filipinos - sell most of these small call-and-text loads, transacted using short message service (SMS). Store owners act as distributors for the service providers, earning a commission on each sale.

Before that system was launched in 2003 by Smart Communications, one of the two main cellular networks here, telecom analysts were projecting that income constraints would limit the use of mobile phones to just 25 per cent of the population.

Then, and now, prepaid mobile phone cards are too expensive for many Filipinos. The cards start at 300 pesos, not far below the minimum daily wage in Manila.

Said Smart spokesman Ramon Isberto: "We wanted to match our service with the cash-flow situation of a larger number of Filipinos.

"Our president Napoleon Nazareno, who has a background in product packaging, came up with the concept of selling cellphone loads in very small quantities, like the sachets of vinegar and ketchup in sari-sari stores.

"The answer was to go electronic, which dispensed with the cost of printing and distributing prepaid cards for these loads."

Today, more than 60 per cent of the population of 90 million use mobile phones, according to industry estimates. And that rapid growth is reaching ever further down the social pyramid, where around a third of Filipinos live on a dollar or less a day.

"We're seeing increasing demand for lower load denominations... and there's still room for growth," said Raul Guerrero, head of platforms and service management at Globe Telecom, which has around 26 million subscribers.

The mini-loads have also transformed the businesses of sari-sari stores.

"I sell more loads than any other item," said sari-sari store owner Emily Cabrejas.

She and other owners told The Straits Times that mobile phone top-ups account for roughly half their daily sales; about 1,500 pesos in Ms Cabrejas' case.

The profit margin for selling the loads is double that of food items.

Because of the economic downturn, Filipinos are sending fewer text messages and making fewer voice calls, as well as shopping around for the best prepaid deals.

The first-quarter earnings of Globe and Smart's parent company, Philippine Long Distance Telephone, showed that while subscriptions for mobile services rose, average revenue per subscriber, an indicator of consumer behaviour, declined.

The telcos are fighting back with promotions targeting the mass market.

For 15 pesos, or the cost of an ice cream dessert in a popular fast-food chain, Globe offers a package of unlimited texting for 24 hours on its network.

"I would choose the load," said domestic helper Mae dela Guardia, a predictable response in this nation of insatiable SMS senders.