The Philippines’ telecoms regulator has told the country’s two dominant operators – PLDT and Globe Telecom – to improve the quality and reach of their internet service within a year or it will recall the 700MHz spectrum the two acquired from San Miguel Corp (SMC).

On Monday the two operators, which together have a 99 per cent market share of mobile connections, acquired the telecoms assets of SMC for nearly PHP70 billion ($1.5 billion), with each taking a 50 per cent stake.

The National Telecommunications Commission (NTC) urged the operators to start using the 700MHz band immediately. Under the agreement with SMC, PLDT and Globe will split 70MHz of the 700MHz spectrum holding, while 20MHz will be returned to the regulator.

The two companies have 60 days to submit a three-year plan on how their networks can cover at least 90 per cent of all cities and municipalities, the Standard reported.

NTC deputy commissioner Edgardo Cabarios said the idea is “to close the gap because we are far behind our neighbours like Malaysia and Singapore”.

The Philippines is well-known for its sluggish internet speeds. Internet metrics provider Ookla reported last year that the country had the second slowest average download speed among 22 Asian countries, averaging just 3.64Mb/s.

PLDT chairman and CEO Manuel Pangilinan said it will be able to see improvements immediately in certain spectrum bands, BusinessWorld reported. “But we need a bit more time, between three to six months, for the 700MHz.”

Meanwhile, Fitch Ratings said the acquisition, which removes the threat of heightened competition in the sector, strengthens the two incumbents’ business profiles at the cost of a temporary increase in debt levels.

Fitch believes that both PLDT and Globe will invest aggressively to expand their data services. PLDT and Globe are likely to have capex of about $1 billion and $850 million, respectively, which are the highest amounts in the last five years for both companies. The Philippine mobile market is highly saturated, but most users are on 2G networks – which provide the operators with plenty of opportunities if they offer faster 4G services.

It said Globe Telecom could reap more benefits as it has greater exposure to the mobile sector, which accounts for 76 per cent of its revenue, compared with 63 per cent at PLDT.