Filipinos Are Getting The Message

Text messaging is all the rage here. The trick now is to spread the word globally

Once a month, 24-year-old Jane Manarang drops by the McDonald's (MCD ) in her busy Manila neighborhood. But she's not there for a burger and fries. Instead, she is stopping by to cash an electronic check. Her husband, a teller at Forex International in Hong Kong, sends a portion of his salary to Manarang using a new mobile-phone-based cash remittance service called Smart Padala. His Hong Kong remittance company sends a text message to Jane's phone, crediting the money to her account. Then she transfers the credit to McDonald's cell-phone account through her phone, and Mickey D gives her the money, taking a percentage of the amount cashed as a fee. It's a great deal for Manarang and her husband, Glenn, because it costs much less than the $5 Glenn would pay for a wire transfer. For amounts above $180, Manarang gets a free Big Mac meal to boot. "It's so fast," marvels Manarang. "I receive a text message, and I can quickly get cash."

That kind of innovative service has made the Philippines the king of text messaging worldwide. Filipinos send an average of 200 million messages daily, or 2.4 per capita. In fact, many Filipinos ignore the voice capabilities of their phones and use their handsets almost exclusively for texting. Nearly 38% of sales in the Philippine cellular market come from text, compared with 1% to 2% in the U.S.

This tidal wave of text has made cellular operators rich. Sales at No. 1 operator Smart Communications Inc., a subsidiary of Philippine Long Distance Telephone Co. (PHI ), jumped by 50%, to $616 million, in the first nine months of this year, while profits soared 212%, to $184 million. Sales at rival Globe Telecom Inc. climbed 14%, to $737 million, and income grew 19%, to $160 million.

The two operators have prospered in part by introducing services that make money transfers by text easier. Customers of both Smart and Globe can load up their phones with electronic funds they can use for both phoning and shopping. When they shop in a store, they pay by sending a text message that transfers the credit to a retailer's account. If a customer wants to convert cash into an electronic credit, the retailers can "top up" the customer's prepaid phone accounts by sending text messages that load credits onto the phones. Globe, which launched G-Cash in October to counter Smart Padala, offers other novel services, including Text Collect, which lets prepaid subscribers send messages at the recipient's expense, or where the sender agrees to pay for a reply.


Now the carriers are looking to expand the market by letting subscribers resell talk time to friends and neighbors. These so-called load transfers allow users to buy phone time in increments as small as 4 cents -- increasing usage among even the poorest Filipinos. A few years ago the penetration rate for wireless subscribers was expected to peak at around 25% of the Philippines' population of 84 million. Today it has already breached 30%. Globe is now predicting that 45% to 50% of the population will be texting on cell phones by next year.

Now the carriers are taking their act overseas, with services aimed at the 8 million Filipinos scattered across the globe. Smart introduced Smart Padala in August, and it has tie-ups with remittance centers or banks in Hong Kong, Japan, the U.S., and several European countries. Globe did the same in October. In August, Smart launched a service targeted at Filipinos in Hong Kong called 1528 Smart. Guest workers who sign up can not only send money via text messaging but can also make low-cost calls home.

Smart and Globe still consider their foreign forays an experiment. But the initial results have been encouraging. Philippine ex-pats have made some 15,000 transfers of cash, for a total of about $2 million, since the Smart Padala service was introduced. That's a drop in the bucket compared with the $7 billion that Filipinos working abroad send home every year, but enough to buy a whole lot of Big Macs.

By Heinz Bulos in Manila

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