PLDT secures NTC nod on Digitel deal, grows mobile base to 62.8M

A new day dawns on Philippine Long Distance Telephone Co. (PLDT) and JG Summit Holdings Inc. after they secured regulatory approval of their P69.2-billion share-swap deal that gave PLDT a majority interest in Digital Telecommunications Philippines Inc. (Digitel). The transaction cemented PLDT's position as the country's largest and most dominant telecommunications juggernaut. Adding Digitel’s 15 million wireless subscribers to its own base of 47.8 million, PLDT now has 62.8 million mobile subscribers. PLDT also grew its fixed line business to 4.5 million with the addition of Digitel’s 450,000 working lines and 600 regional and local exchanges. The National Telecommunications Commission (NTC) on Wednesday approved the transfer to PLDT of 51.55 percent interest in Digitel, according to the telecom firms’ joint statement. PLDT to divest itself of CURE NTC’s nod came with some sacrifice for PLDT. That price is wholly owned subsidiary, Connectivity Unlimited Resources Inc. (CURE), which carries the Red Mobile brand and owns 10MHz of 3G frequencies in the 2100 band. The NTC approved the CURE divestment. The NTC order provides that CURE will sell its Red Mobile business including its subscriber base, brand, and fixed assets to PLDT's main mobile unit — Smart Communications. Afterward, Smart will sell all its rights and interests in CURE, “whose remaining assets will consist of its congressional franchise, the affected (3G) frequency, and related permits. According to PLDT’s latest disclosures to the Philippine Stock Exchange, Red Mobile has 1.5 million subscribers – all prepaid. This subscriber base grew 100 percent in 2008, 386 percent in 2009 and 1,098 percent in 2010. PLDT introduced Red Mobile in November 2008. CURE’s congressional franchise (Republic Act 9130) is valid until April 24, 2026. Globe Telecom welcomes divestment For its part, Globe Telecom — Smart's long-time rival and now its only remaining major competitor — welcomed PLDT's divestment of the affected 3G frequencies. “The approval of the joint application with condition to divest PLDT’s 10Mhz 3G frequency is a progressive step for the NTC in promoting consumer welfare and fair competition." said Globe head of corporate legal services group Atty. Froilan Castelo in a statement sent to GMA News Online. "The decision of the regulatory body upholds its support to the industry, ensuring equal opportunities among players to compete, and allowing consumers to enjoy quality services from their chosen service provider," Castelo added. Details of the share-swap “Together with 3.277 billion shares representing 51.55 percent of Digitel’s outstanding common stock, PLDT also acquired the zero-coupon bonds issued by Digitel Group to JG Summit," PLDT and JG Summit said in a statement released via the PSE. The zero-coupon bonds were assumed to be convertible or exchangeable into 18.6 billion Digitel shares. Under the transaction, PLDT also assumed the P34.1 billion in advances made by JG Summit to the Digitel Group. In payment of the convertible bonds and the advances, PLDT issued 27,679,210 news shares of common stocks at P2,500 per share. The share-swap deal gave JG Summit an estimated 12.9 percent of PLDT’s expanded outstanding common stock. Edgardo Cabarios, NTC director for content carrier authorization division, told GMA News Online that the deal was “approved because it serves the public interest." The merger will help reduce inter-network and text messaging rates, and this is “one way to encourage new players to join and compete in the market," Cabarios said. En route to “largest buyout" The deal also triggers a mandatory tender offer for the acquisition of the remaining 48.45 percent Digitel shares held by the public, and PLDT said it will soon announce the date for its tender offer. The valuation of the Digitel and JG Summit assets — called Enterprise Assets — was approved by the Securities and Exchange Commission on July 29. Should PLDT pursue the tender offer, Digitel shareholders will have an option to sell at P1.6033 per Digitel share or swap their holdings for PLDT common shares at a swap ratio of 1.559.28 Digitel shares for each new PLDT common. The tender offer — if consummated —will bring the total transaction value to P74.1 billion, “making it the largest buyout in Philippine corporate history," said PLDT and JG Summit in the joint statement. On June 21, before the valuation of the Enterprise Assets were approved, the SEC issued a confirmation that PLDT may close the main transaction with JG Summit before closing the tender offer. Digitel 'remains in good hands' In a separate statement also issued via the stock exchange, PLDT chair Manuel V. Pangilinan said “PLDT is extremely pleased to welcome Digitel to the PLDT Group. PLDT will continue to provide its consumers with the best value in terms of price, quality and range of products and services and we have committed to continue offering ‘unlimited’ type of services in fulfillment of this promise. In addition, Sun subscribers can benefit from PLDT’s extensive infrastructure and varied service offerings." “This transaction ensures that Digitel remains in good hands. Together, the PLDT-Digitel Group will be well-positioned to compete not only with formidable existing competitors but with well-funded new entrants as well," JG Summit chair James L. Go, said in the same statement. — With a report by AM Marzona/VS/TJD/ELR, GMA News