Telco #3 not meant to be
CTALK - Cito Beltran (The Philippine Star) - June 1, 2016 - 12:00am

The book of Ecclesiastes teaches us that “For everything there is a season,” but sometimes certain things are not meant to be.

That was clearly the realization of San Miguel Vice Chairman and COO Ramon Ang when he decided to let go of a six-year dream for San Miguel Corp. to be the third telecommunications provider in the Philippines.

Six years is actually a record for RSA who has let go of other projects in much shorter time once he realizes that the numbers don’t make sense, the obstacles are far more annoying than the potential business profit or when the fun is gone and the investors won’t be happy.

I have known Ramon Ang even before he came into San Miguel and I know that he does business with no emotional attachments, he does not like complicated scenarios, he abhors conflict and legal confrontations and at the end of the day he would rather let go of what’s in hand, if what’s in hand is going nowhere. Even back then he would always tell me to learn to let go of things even at a loss and start fresh on something that has better potential, because you can earn back what you sacrificed if you reinvest in something profitable.

When Ambassador Danding Cojuangco and RSA thought of putting up an airline (All Asia Airlines) back in the 90s, everyone thought it was such a great idea that they immediately had investors for the project. But after four years of studying every imaginable business model and route combinations, it became clear that the project would make very little profit and would take forever to build up. Ramon Ang immediately shut down the project and reassigned everybody to other projects. Yes there was a bit of investment involved but Ramon Ang’s philosophy was better lose a little at the start than lose everything in the end.

Of course we all know that Ramon Ang has moved on to many successful projects and businesses locally as well as in the region covering infrastructure, food and petroleum. But every once in a while he would cut and run from headaches or low performance investments primarily because it is not characteristic of San Miguel to get stuck in businesses that eat up too much capital but don’t churn out SMC type of profit margins.

So why exactly did RSA let go of the high value telecoms frequency and sell them to PLDT and Globe?  For starters, it was clear that the six-year dream was going nowhere. Imagine having the most powerful racing engine in the industry but no platform good enough to put it in and no team of experts to back you. One rule that Ang and Cojuangco have always followed is to go with the best and the brightest in the industry wherever they maybe in the country or the world.

Yes, SMC had the money and the best frequency any telecoms could wish for, but they had to match all that with the best team with long-term experience. However, the only available teams with experience were from out of town and did not want to compete with hometown favorites. Even as they were already building up their network, the end was not in sight and as a publicly listed company they could not throw money into a bottomless pit.

As I analyze SMC’s decision, I am reminded of a couple of very appropriate biblical phrases beginning with Luke 14:28: “For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it?” Obviously SMC did not have a team to complete it.

On top of that, Globe and Smart/PLDT were already breathing down the neck of San Miguel and were ready to sue SMC and the National Telecommunications Commission for SMC’s none use and possibly “wasting” government resource and public utility. Given that all of these fall under franchise provisions, San Miguel was looking at the possibility of losing their frequency as well as all the money they invested simply for not utilizing the frequency and failure to put up an actual working telecoms.

In this regard, RSA must have picked up the advise in Mathew 5:25:

“Settle matters quickly with your adversary who is taking you to court. Do it while you are still together on the way, or your adversary may hand you over to the judge.”

Aside from the seemingly pragmatic and biblical view of resolving their problem, San Miguel Corporation and Ramon Ang clearly opted to sell to the “duopoly” because both already have established business and nationwide networks, unlike SMC that would have to catch up and undergo a challenging learning curve and build up process.

To sweeten the pot Globe and Smart/PLDT of course would cover the investments of SMC in the last six years, which would free up a large chunk of cash that can be reinvested into more profitable projects here or abroad. In addition, the “duopoly” promised to free up excess 2G – 3G – 4G and 5G frequencies that in turn would be available to a third party telco group.

 In addition to the investment payback, Globe and Smart/PLDT made a public commitment that within six months of the frequency turn over, the standards of telecoms service in the Philippines would reflect faster and more affordable internet services as well as wider coverage for mobile broadband. This is probably the real win-win feature of the sale. All three companies are well aware that the incoming administration intends to pressure the telecoms companies to shape up or face the possibility of an open-door competition from foreign telcos. As Filipino companies, the respective CEOs would be signing their own death wish by not helping each other and eventually giving away or opening up the local market to foreign “predators.”

We’ve all had to give up something at some point in our lives. It does not mean we lost, failed or sold out. It simply meant it was not meant to be or in this case, there was a greater purpose for the greater good. That greater good hopefully would be the end of Third World quality telecommunications in the Philippines.

Let’s all pray for it.

ALLAN ENRIQUEZ RIVERA GRAB CAR LAND TRANSPORTATION FRANCHISING AND REGULATORY BOARD TANIM-DROGA
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