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McClatchy-Tribune  06/10/2014 12:01 AM ET
Now Corp targets 'sachet crowd' for its text-only telecom service [The Manila Times, Philippines :: ]

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June 10--Now Corp plans to invest $28 million to activate a text-only telecommunications network based on the Global System for Mobile Communications (GSM) standard but with a marketing twist that's uniquely Filipino: the micro-retail or "tingi" system.

The company plans to roll out a text service priced at less than P3 a day, lower than Globe Telecom's P7 a day, Smart's P6.66 a day and Sun Cellular's P5 a day.

Its president and chief executive officer Mel Velasco Velarde suggested that the so-called "poor market" actually has strong purchasing power. The lower income classes have a dynamic consumption pattern that the company hopes to tap, Velarde told reporters in a roundtable discussion.

The company plans to target just 2 to 5 per cent of the market currently dominated by telecom giants Globe Telecom and Smart Communications. These telecom firms generate two million texts a day and Velarde said his company wants a piece of this pie.

Velarde explained that they are indeed aiming at the low-end market including students, public utility vehicle drivers, vendors, and others, which he described as the "sachet market".

This refers to the practice of Philippine retailers to repackage their products, such as shampoos and toothpaste, in small packages such as sachets to become affordable for lower-income Filipinos. These companies still make huge profits from microretail due to the sheer volume of the mass market.

Even telecom companies are now trying a variation on the "sachet marketing".

Trendwatching.Com reported that Smart Communications has turned its customers into salespeople. Its Smart Buddy System allows cellular phone customers to resell their unused credits. For each P1,000 sold, the "merchant" receives a P150 commission.

Now Corp is looking at $28 million in capital expenditure, targeting 2.9 million subscribers and P1.6 billion in revenues in five years.

He said that they could start raising capital in the markets following approvals by financial and banking institutions.

"We are looking at various options. One would be raising shares in the market or through borrowing or maybe some hybrid facility. The ideal would be 50 percent equity and 50 percent debt," he said.

Velarde expressed optimism that his firm can be a legitimate third or fourth player in the telecommunications industry given the strong demand and growth in the country.

He said they see their service as a "common man's text facility unlimited" anchored on the sachet marketing model.

Now (formerly Information Capital Technology Ventures, Inc.) received last year licenses for mobile cellular and wireless fiber optic services for operations nationwide.

"We got a data license and multimedia services as well that was awarded by the NTC (National Telecommunications Commission) last year," Velarde said.

"We will use all the frequencies of Next Mobile. It has a huge chunk of frequencies that can be used as a backhaul and also for direct to consumer devices," he added.


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