A Strategy paper for Manila North Tollways Corporation (MNTC)

• Main Author: Lamberte, Armi M.
• Format: text
• Language: English
• Published: Animo Repository 2006
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/4511
• Institution: De La Salle University

Private sector participation has become a common arrangement in the toll road industry as entry into the sector necessitates significant capital outlay. Although such has been the trend, government influence on the industry has and will remain strong given the following: Toll road is a regulated handled by the Toll Regulatory Board. Opportunities for industry growth (save for demographics like population increase) are anchored mainly on the governments support programs which encourage intensified economic activity outside Metro Manila. Aside from the competition posed by local free roads, threats being faces by the industry spring from government action, primarily delayed implementation of toll rate adjustments, political action committees, and change in relevant laws. Of the five model, the government can be influential both as a rival and a buyer two of the forces seen as holding moderate power in the industry. The government may also be influential as a substitute via its pursuit of projects like railroads. Private sector participation is exemplified in the development of the toll road sector via the North Luzon Expressway (NLE). MNTC holds the concession to rehabilitate, expand, and operate the NLE until 2030 (the Concession Period). At the end of the Concession Period, MNTC will transfer the NLE back to the government without cost. The NLE is the 84-Kilometer main transport corridor that links Metro Manila to the provinces in the Northern region. Actual rehabilitation and construction were completed by MNTC in two years, allowing the company to commerce operations on February 10, 2005 via Tollways Management Corporation, MNTCs Operator. As the main corridor to the Central and Northern Luzon, traffic volume in the NLE has grown significantly to 163, 000 vehicles per day. Although this is the historical record, average traffic volume since the start of MNTCs commercial operations in February 2005 reached a high of only about 152,000 vehicles per day as certain amount traffic that used to utilized the NLE has been diverted to McArthur Highway. Data also show that there has been a shrinkage in the market being shared by the two roads (represented by the 7.2% suppressed demand), which may have also contributed to the weaker-than-expected actual revenue levels of MNTC. The actual traffic volume results led to revenues of P5.1 billion for MNTC (from February to December 2005), equivalent to a 33% shortfall against projected revenues for the same period. In order to improve revenues and preserve the expected US$ return of 13.9% on the project, MNTCs overall strategy must be concentrated on the following: 1. Knowledge-building efforts for the company personnel and MNTCs market 2. Maintenance of high quality asset (the entire NLE) alongside maintenance of high quality service to the customers 3. Creation of alliances with the government for tourism efforts including travel to northern Philippines The implementation of the first proposed overall strategy is essential to winning back the traffic that diverted to McArthur Highway and supports the companys objective of being the dominant road artery north of Metro Manila. The implementation of the second proposed overall strategy, on the other hand, is essential to maintaining the existing customers of the new NLE and instilling brand loyalty, hence providing a shield against rivals and substitutes. It also supports MNTCs objective of ensuring customer satisfaction through the quality of service (which will more than justify the toll fees being paid) and of being recognized as the premier toll road company in the Philippines. Finally, the implementation of the third proposed overall strategy is essential to attracting motorist that shield away from traveling to the North (suppressed demand) and tapping new markets simultaneously. This will increase traffic volume by releasing, in part, or in its entirety, the 7.2 % estimated suppressed demand. The proposed strategies will aid MNTC to improve traffic volume by 5% in 2006 and correspondingly increase revenues by the same rate. In order to protect the 13.9% US$ expected return from the project, however, traffic volume must be increased by 9% for the subsequent five to six years, before allowing it to taper off to growth levels of 1% to 3% as capacity constraints are reached. Essential to the implementation of the proposed strategies are the improvement / development of commercial policy (for knowledge-building on the part of the customer and establishment of linkages with the government for tourism efforts), operations and maintenance policy (for ensuring high quality asset and service), and performance / skills evaluation policy (for knowledge-building from the perspective of MNTC).