San Miguel sells telco assets for P70 B

PLDT, Globe team up to seal acquisition 

MANILA, Philippines - Rivals Philippine Long Distance Telephone Co. (PLDT) and Globe Telecom Inc. have teamed up to acquire the telco assets of diversified conglomerate San Miguel Corp. (SMC) valued at P70 billion  in line with the aim to provide customers with better Internet services within three months at the earliest.

Both PLDT and Globet announced in separate press briefings yesterday the approval given by their respective board of directors of the acquisition as well as the signing of the deal.

The deal involves PLDT and Globe purchasing 50 percent each of the equity interest of SMC’s telecommunication business which is held by Vega Telecom Inc. for P69.1 billion.

Vega owns an equity stake in listed SMC unit Liberty Telecoms Holdings Inc. as well as in various companies including Bell Telecommunication Philippines Inc., Eastern Telecommunications Philippines Inc., Cobaltpoint Telecommunications Inc. (formerly Extelcom), Tori Spectrum Telecommunications Inc. (formerly wi-Tribe) and Hi-Frequency Telecommunication Inc.

Under the deal, PLDT and Globe will acquire the entire share capital and assume the liabilities of firms with additional spectrum frequencies such as Bow Arken Holdings Co. (parent company of New Century Telecoms Inc.) for P691 million, and Brightshare Holdings Inc., (parent of eTelco Inc.) for P206 million.

The equity portion of the consideration for Vega, New Century and eTelco worth P52.85 billion will be paid in three tranches, with the first payment or 50 percent upon signing of the agreement.

The second payment of 25 percent will be made by Dec. 1, while the balance of 25 percent will be due by May 30 next year.

As part of the transaction, PLDT and Globe will enter into co-use arrangements on a 50-50 basis, to utilize additional frequencies including 80 Megahertz (Mhz) in the 700 Megahertz (MHz) band, the spectrum which the incumbent players yearn for due to its capability to penetrate buildings and walls as well as lower investment requirements.

PLDT and Globe are also set to return 20 Mhz in the 700 MHz band, and other radio frequencies in the 850 MHz, 2500 MHz and 3500 MHz bands to the National Telecommunications Commission so they could be utilized by a third player in the market.

PLDT chairman Manuel V. Pangilinan said the telco would use proceeds of the sale of its 25 percent equity interest in Beacon Electric Asset Holdings Inc. to Metro Pacific Investments Corp. to fund the acquisition of SMC’s telco assets.

Globe chief finance officer Rizza Maniego-Eala said the Ayala-led telco meanwhile, would finance the acquisition mainly through debt.

SMC was initially looking for possible joint venture deals to launch its telco service in the country after talks with Australia’s biggest telephone company Telstra Corp. Ltd. failed.

The conglomerate decided to sell to PLDT and Globe as the proposal given by the telcos was seen to be in the best interest of consumers.

“This is a sacrifice we have to make to finally unlock the full potential of our high-quality, mobile broadband spectrum faster and allow consumers access to its benefits through the combined resources, network and expertise of the two carriers,” SMC president and chief operating officer  Ramon Ang said.

Pangilinan said the transaction offers a breakthrough opportunity, not only for the companies involved but also for the industry and the country in terms of having a better Internet experience.

“This will enable existing operators to provide significantly improved Internet and data services to the public and to our customers in the shortest possible time. At the same time, it leaves the door open for new entrants into the industry. Taken together, this will enable the industry to better support the country’s development efforts – especially significant with the onset of a new government,” he said.

Pangilinan said customers can expect to benefit from the deal in terms of experiencing improved Internet services within six months.

For his part, Globe president and chief executive officer Ernest Cu said the telco’s subscribers may start enjoying faster mobile Internet services within three to four months.

While the rival telcos worked together to get access to the frequencies held by SMC, he said competition is expected to continue between the two firms.

“While we cooperated here in terms of getting frequency freed up, I think you will see intense competition shortly,” he said.