Ongpin consolidates telco holdings in SMC

MANILA, Philippines - Businessman and former Trade Minister Roberto “Bobby” Ongpin appears to be consolidating his telecommunications interests in San Miguel Corp. (SMC) with the impending sale of two of the telcos he controls to SMC.

ISM Communications Corp., which is owned 39.3 percent by UK-based investment manager Ashmore Group, intends to sell its entire 77 percent stake in Eastern Communications to SMC, ISM president Eric Recto revealed yesterday.

At the same time, Trans Digital Excel (TDE), the creditor-turned-majority shareholder of Express Telecommunications (Extelcom), is set to sell its stake in Extelcom to the SMC group after all legal questions raised by the Lopez Group involving TDE’s ownership in Extelcom have been resolved by the Supreme Court in favor of TDE.

Both Eastern and Extelcom are either directly or indirectly controlled by Ongpin, who represents Ashmore’s interests in the Philippines.

On the sidelines of yesterday’s stockholders’ meeting of PhilWeb, SMC president and COO Ramon Ang said TDE is still finalizing some details before the sale of its stake in Extelcom can proceed.

A knowledgeable source told The STAR that one of the details being worked out is what the final structure will be as far as Ongpin’s telco interests are concerned.

With SMC chairman Eduardo Cojuangco Jr. preparing to unload his entire 15-percent equity interest in SMC in favor of Top Frontier Investment Holdings, a company controlled by Ongpin, the source said the sale of Eastern and Extelcom to SMC will in effect mean that Ongpin will just be transferring his telco companies to SMC, which he will eventually control.

Ang told The STAR that if Top Frontier opts to buy the 493.37 million shares in SMC owned by the 44 corporate stockholders associated with Cojuangco’s group, Top Frontier will end up owning 60 percent of SMC. 

When asked what kind of relationship he has with Ang, Ongpin said he has complete trust in the former. “He knows what he is doing,” Ongpin pointed out.

The Ashmore Group, which manages $33 billion in pooled funds, segregated accounts and structured products, also has a stake in publicly-listed Alphaland.

Another issue that needs to be worked on by Ongpin’s group, sources revealed, is what will happen to ISM if it sells its entire 77 percent stake in Eastern. Once the sale materializes, ISM will end up being a shell company, with no other assets.

Top Frontier, which is 49-percent owned by SMC and 51-percent by an investor group that includes Ongpin, Iñigo Zobel and Joselito Campos, was given “continuing” and “exclusive” option to purchase and acquire Cojuangco’s shares until Nov. 19, 2012.

The holding firm has the right to acquire from ECJ (Eduardo Cojuangco Jr.) companies 476.72 million Class A (reserved for Filipinos) and 16.65 million Class B (open to local and foreign investors) shares during the period.

At present, Top Frontier is the beneficial owner of 54.6 percent of SMC’s class “A” shares and 55.8 percent of Class B shares. It had voting rights to a total of two billion shares representing about 89.5 percent of the beer-based giant’s outstanding capital stock.

Each of the 44 ECJ companies that committed to sell their shares to Top Frontier under the option agreement owned less than five percent of SMC.

Even with his impending takeover of SMC, analysts said Ongpin will most likely keep Ang at the helm of SMC.

Earlier, Ang told The STAR that SMC wants to position itself as a very strong player in the local telecommunications industry in a bid to further improve telco services in the country and bring down rates to more affordable levels.

Ang said aside from Eastern and Extelcom, another company, Bell Telecommunications, has been offered to them.

At present, SMC has a 32.7 percent stake in Liberty Telecom Holdings via Vega Telecom. It has also signed a memorandum of agreement with Qatar Telecom, which also holds shares in Liberty , to explore areas on wireless broadband and mobile communications projects. He said they have an option to go up to 49 percent.

Ang confirmed that he has received offers for a possible stake in Extelcom, Eastern and BellTel but the choice will boil down to which company will offer the best value for SMC.

He pointed out that they are interested in buying Extelcom because of the frequencies that it owns.

SMC’s acquisition of a stake in Liberty allowed it to go into wireless broadband, but the acquisition of Extelcom would allow it to get a cellular license. Eastern, meanwhile, offers full-service telephony and managed telco services, as well as data and Internet leased circuits.  

He added that they have already invested a few billions of pesos for the rollout of the wireless broadband network. “We want to roll out nationwide,” he said.

Ang expressed particular interest in voice over the Internet (VoIP) applications, although he admitted that they remain to be very interested in going into mobile cellular telephone services. “If given the opportunity to go into cellular, we will,” he said.

He explained that there is room for a significant fourth player in the telecommunications industry and the cellular mobile telephone system (CMTS) business, as well as for improved telecommunications services and rate.