{"id":333160,"date":"2025-07-11T01:03:04","date_gmt":"2025-07-10T17:03:04","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=333160"},"modified":"2025-07-11T01:08:09","modified_gmt":"2025-07-10T17:08:09","slug":"commentary-konektadong-pinoy-act-kpa-telco","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/commentary-konektadong-pinoy-act-kpa-telco\/","title":{"rendered":"Commentary: Konektadong Pinoy Act (KPA) and how it impacts TEL, GLO, CNVRG, DITO"},"content":{"rendered":"\n

Recap on KPA<\/strong><\/p>\n\n\n\n

The three telco players (TEL, GLO, DITO) will be the most affected as the proposed Konektadong Pinoy Act (KPA) removes the need for a congressional franchise for internet service providers (ISPs), thus easing the entry of new players. The bill also removes the need for ISPs to build out a fiber\/cable network, and instead favors the use of satellite tech over traditional tech in addressing the digital divide and reaching unserved areas.<\/p>\n\n\n\n

One way or the other<\/strong><\/p>\n\n\n\n

We note for GLO and TEL that the market has possibly priced in the KPA as selling seems to have bottomed-out. While CNVRG have been seeing the same trend in the past few days. If signed, bill could further fuel selling on the two telco giants with DITO and CNVRG being less impacted. If vetoed, it would be a great entry price for GLO and TEL as both stocks offer attractive dividend yields at current prices. In terms of valuations, GLO\u2019s FY25E P\/E ratio of 11.8x is slightly more than 1 standard deviation below (-1SD) its 10Y average P\/E of 14.6x. The undervaluation for TEL is more pronounced, with the stock trading at a FY25E P\/E of 7.7x, with is almost -1.5SD lower than its 10Y average of 11.6x. Aside from cheaper valuations of TEL, it also offers higher div yield of 7.8% vs GLO\u2019s 5.8%. <\/p>\n\n\n\n

Wait and see stance<\/strong><\/p>\n\n\n\n

The telco industry is about to be shaken up, seeing how the market is reacting to the proposed bill. Despite this, we are still a BUY on CNVRG with a Target Price of P24.58\/share<\/strong> given its diverse service portfolio and first-mover advantage. For the telco giants, it would be better to wait and see if the bill is passed or vetoed. However, if we must pick one, we would prefer TEL over GLO<\/strong> given cheaper valuations, higher yield, and less exposure to the mobile segment.<\/p>\n\n\n\n

Stock Recommendations<\/strong><\/p>\n\n\n\n

BUY: Converge ICT Solutions, Inc. (CNVRG) \u2013 Target Price: P24.58
BUY: PLDT, Inc. (TEL) \u2013 Target Price: P1,618.62<\/p>\n\n\n\n

Why go satellite? <\/strong><\/p>\n\n\n\n

Satellite internet excels at providing connectivity to remote areas where traditional internet is unavailable. Although the trade-off for adaptable connectivity are slower speeds, higher latencies and that they are heavily affected by weather conditions. There is no need to setup additional ground infrastructure, meaning there will be faster rollouts in rural areas and it could rapidly increase the number of Filipinos connected to the internet.<\/p>\n\n\n\n

Filling the gap of the digital divide<\/strong><\/p>\n\n\n\n

There are only a few satellite providers here in the Philippines like Kacific, Starlink and FiberSAT (owned by NOW, whose license-to-operate has been revoked last April 2025). Given the limited competition, satellite internet services are currently much more expensive than the traditional wired connections. The KPA lessening the regulatory hurdles would encourage foreign and local satellite firms to join the race and could (in theory) bring down satellite internet prices.<\/p>\n\n\n\n

The lack of consumer cost-lowering mechanism<\/strong><\/p>\n\n\n\n

However, the Philippine Chamber of Telecommunications Operators (PCTO) noted that this would not guarantee that there would be lower prices for consumers. We believe this would benefit many but the potential erosion to the revenue base of incumbent players due to increased competition could also stymie their ability and willingness to invest in improving existing networks.<\/p>\n\n\n\n

Incentives or subsidies<\/strong><\/p>\n\n\n\n

In Australia, there are government programs that provides subsidies to rural-based users who are subscribing to satellite internet. Business-focused programs like Regional Connectivity Program uses grants to fund the delivery of ‘place-based’ telecommunications infrastructure projects to improve digital connectivity across regional, rural, and remote Australia. There were also consumer-focused broadband incentive programs in the past which involved issuing limited-time subsidy vouchers worth $500-1,000 for farmers and remote users in rural areas to bridge the cost of installing broadband (including satellite). <\/p>\n\n\n\n

The implementation of similar gov\u2019t programs in the Philippines would help guarantee lower costs for users and incentivize satellite connectivity. Additionally, this would not only entice new players, but also encourage existing telcos to include satellite services in their current portfolio.<\/p>\n\n\n\n

CNVRG is the only one currently offering satellite-based services through its partnership with Starlink. The company entered this partnership to expand its customer base and to help towards its goal of targeting MSME\u2019s in rural areas. Just like the rest of its services, we believe the company would integrate other customizable enterprise connectivity solutions to its Starlink service which could further grow its MSME segment.<\/p>\n\n\n\n

<\/div>\n\n\n\n

This report is prepared by PinoyInvestor\u2019s partner broker below. Find out more about our partner brokers<\/a> and sign up to avail their complete trading brokerage services.<\/em><\/em><\/p>\n\n\n\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

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