Philippine Lockdown Gives $3.4 Billion Boost to PLDT, Globe

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While the coronavirus grinds the $331 billion Philippine economy to almost a halt, a boom in mobile digital payments is reviving investor interest in the nation's two telecom carriers.

Forced to stay at home since President Rodrigo Duterte ordered a lockdown in mid-March, millions of Filipinos are now using their smartphones to pay for items from bread to vegetables and meat, increasingly shunning cash transactions. Some employers are even paying salaries using phone apps.

The Covid-19 pandemic is breathing new life into phone-based payment systems that earlier failed to take off in the Southeast Asian country. While PLDT Inc. and Globe Telecom Inc. introduced their platforms as far back as 2000, their apps started tasting success only after handsets and wireless data became more affordable.

“The days of people of wanting to hand cash over as their main means may be numbered,” Globe President Ernest Cu said, citing concerns that the coronavirus can stay on bills for a long period of time. Registration at its GCash payment system has more than doubled month-on-month since the lockdown, making it the third most downloaded free app behind Tiktok and Zoom, according to Maria Aurora Sy-Manalang, chief technology and operations officer at the carrier.

Transactions and total volume handled by PLDT's PayMaya more than doubled from a year ago in the first quarter, and “this accelerated growth trajectory has been sustained,” PayMaya President Shailesh Baidwan said.

Shares of PLDT on Wednesday have rebounded 50% from a 16-year low touched on March 20, while those of Globe have jumped 37% from an almost two-year low. PLDT and Globe are two of the three stocks that are up in the 30-company benchmark Philippine Stock Exchange Index this year, with recent gains helping add a combined $3.4 billion to their market value. PLDT fell 3.8% on Thursday as it reported a 12% drop in first-quarter net income, while Globe slid 1.8%.

“Globe and PLDT have always said that fintech is a new leg of growth and the virus gave a glimpse of what can happen,” said Rachelle Cruz, an analyst at Manila-based AP Securities Inc.. “Fintech will be one of the megatrends post coronavirus. It will get higher market shares in money transfers and online payments that could lead to other financial services.”

The pandemic is spurring people in countries from India to Indonesia to switch to phone apps for payments as they avoid touching cash -- the predominant mode of transactions. In the Philippines, the central bank says only 9% of the population uses credit cards. PLDT and Globe have about 160 million in combined wireless subscribers, exceeding the nation's population of 108.7 million.

The leap toward technology -- use of wireless data for payments -- is among initiatives pursued by the carriers as widespread use of data and social media combined with crushing price wars have dented revenues from calls and texts. Building another source of revenue has also become more urgent as PLDT and Globe face the entry of a third major player.

While Globe and PLDT's financial services aren't likely to end 2020 with a profit, these initiatives could post narrower losses and turn cashflow positive over a shorter time as both carriers build on their gains from the lockdown, according to Cruz.

GCash transactions have doubled from a year ago, with money transfers and online payments during the lockdown growing at 20% to 25% over the previous quarter, and the average size of settlements during the lockdown rising 40% to about 1,000 pesos, Sy-Manalang said. Meanwhile, PayMaya's transaction volumes for previously cash-heavy sectors such as pharmaceuticals and groceries are rising as Filipinos shop for essentials during the lockdown, Baidwan said.

“The virus has accelerated the acceptance of mobile phones as a mode of payment,” said Cruz at AP Securities. “The quarantine left many people no choice but to use the technology that's easily available and ubiquitous.”