Goodbye Sun Cellular?

“…dusk is the time when men whisper of matters about which they remain silent…” – Simon Raven

It started out as a mere whisper within the four corners of the board room after our wireless consumer head Ariel Fermin took over from Charles Lim in May. A few months later, the whisper about Sun Cellular being dissolved is now slowly echoing within every floor of Smart Tower. 

But is there even a tinge of truth to this latest rumor?  Let us check the signs.

The Lost Revenue

When we bought Sun Cellular for P69.2 billion in 2011, the big idea was the total dominance of the industry with a combined 67% market share in revenue terms.  Ironically, revenue market share is the one being used by our competitor as the new metric of leadership instead of subscriber base which we use.

However, the story today is different.  In a two player market and in terms of revenue share, Smart and Sun Cellular have a combined share of 53.4% which 13.6% less revenue from the 67% in 2011. We still lead but the 13.6% we lost in the past years amounts to billions of pesos.  (Note: Dun dapat kukunin bonus natin)

In terms on a per brand basis, Globe leads in the revenue share and so they claimed with 34.5% followed by Smart with 26.7% then by Talk&Text with 15.6%, TM with 12.2% and lastly, Sun Cellular with 11.1%. By dissolving the Sun Cellular business into the Smart’s, we can regain the revenue market leadership at 37.8% cornering the top spot in both two player and multi-brand market and save face. To become the undisputed leader again, we must dominate both revenue and subscriber base just like before.

Tainted Brand Reputation

Another sign is the “Sun Cellular advertising campaign gone wrong” of Sun postpaid boss Joel Lumanlan.  The brand reputation of Sun is now taking a massive beating after the so-called nitpicking creative insertion in the campaign spilled-over in the media as seen here: 1) Manila Bulletin “Globe lodges complaint vs Sun” http://www.mb.com.ph/globe-lodges-complaint-against-sun-ad/ and 2) Biz Buzz “Telco Ad War” http://business.inquirer.net/200369/biz-buzz-zambales-mining-mess . (Note: We love PDI’s Biz Buzz, they carried our story before about Charles Lim, only to remove it after hehehe)

Someone from the Sun postpaid team also informed us that Ad Standard Council (ASC) which is the body that approves all commercials ordered them to take out all ad materials with the brand refresh tag  “Choose Better”. Producing ad materials is not cheap and it cost millions. (Note: Yes, Joel Lumanlan threw away millions of A&P monies away. Again, bonus na lang sana natin yun). The same source also disclosed that Fermin knew and approved all the materials in the advertising campaign.

This same dirty marketing tactics were used by former wireless consumer business head Noel Lorenzana during the launch of the Live More campaign and we all know what happened to him.  The Live More campaign shall always be remembered as the onset of the company’s downfall in which we have yet to obviously recover.   I think Fermin is not stupid to follow the footsteps of Lorenzana and moreover suffer the same fate.  So the intent is clear as daylight, the tainted reputation of Sun Cellular becomes now the one of the main reasons to integrate it with the mother wireless brand and instantly gain the leadership in the revenue market share.

The Telstra Scare

The entry of Telstra and San Miguel shook the entire industry with anticipation.  Telstra would provide Ramon Ang with the added financial resources and technical expertise.  We all know the bad blood between Ang and our chairman. For MVP, this is a bit personal and would be beaten by Ernest Cu in than by Ang in the industry that he nurtured.

Also, many former Smart employees, those who suddenly became redundant, have been hired by San Miguel so they have knowledge about the local market.  Since there is no job security here since the late 2013, many are hoping to jump ship to San Miguel which is very aggressive in pirating telco people. 

Another source told us that our bosses are now scrambling to improve the performance of the wireless business because the 2nd player which is us is always the one that gets affected when a new player comes in.

The pressure is quickly mounting on the back of Fermin and the entry of Telstra and San Miguel is another boulder that he is carrying on his back. We believe that the brand integration of Sun into Smart is the most logical and immediate step to create a perception that we are still the leader in this business be it in prepaid and postpaid.

How will James Go react? We think someone have already whispered this impending folding of Sun Cellular to him since the Q3 performance results are already known.  

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