Meralco's single largest shareholder is PLDT

MANILA, Philippines - Philippine Long Distance Telephone Co. (PLDT) is poised to become the single biggest shareholder of Manila Electric Co. (Meralco), with the Lopez family diluting its stake in what analysts said appeared to be a battle for control of the country’s largest power distribution utility. Lopez-led First Philippine Holdings Corp. on Friday said it would sell a 20 percent Meralco stake to PLDT unit Pilipino Telephone Corp. (Piltel) which, together with a 10.2 percent interest already held by the Beneficial Trust Fund of PLDT, would bring the dominant telco’s shareholdings to 30.2 percent. The Lopez Group’s stake will now be reduced to 13.4 percent and the sale sets up a possible clash between PLDT and food and beverage conglomerate San Miguel Corp., which has an estimated 27 percent interest and is said to be eyeing control of Meralco. The Lopezes are said to have found an ally in PLDT chief Manuel V. Pangilinan, whose firm faces competition from a diversifying San Miguel which is also venturing into telecommunications. Benjamin Lopez, vice-president of First Philippine Holdings, said the entry of the Pangilinan group would reduce the Lopezes’ representation in the Meralco board to two or three seats. The Lopezes currently hold five of the 11 seats, with four going to San Miguel and two occupied by independent directors. "First Holdings and PLDT agreed on certain corporate governance principles such as nomination of directors to the Meralco board," the company said in a disclosure. Mr. Lopez said "The proceeds from the transaction will be used by First Holdings for subsidiary investments, debt payments, and other general corporate purposes." Oscar M. Lopez, chairman and CEO of First Holdings, said "We are very optimistic with this new partnership. We believe that we can leverage the strengths and synergies inherent among each of the partners and ultimately benefit our customers and the country as a whole." Piltel, operator of PLDT’s low-cost Talk ’N Text cellular phone service, said it had no intention of further increasing its investment in Meralco. Officials told analysts in a briefing on Friday that the transaction would be completed by the third quarter. Piltel will also sell all of its telecommunication-related holdings to parent Smart Communications, which in turn will offer to buy the shares of Piltel’s minority shareholders. Piltel will then become a holding company. "These arrangements, once completed and implemented, will serve to consolidate the PLDT Group’s cellular business under Smart, thereby maximizing revenue streams and eliminating any lingering regulatory issues relating to the traffic between the two companies," PLDT said. PLDT cited several "operational and business synergies" to be gained from the Meralco acquisition, among which include a fiber optic backbone, easements and rights of way, electric power poles, procurement, advertising spend, radio frequencies, business offices, bill statement printing and enveloping, and easy availment of commercial power in Meralco franchise areas. The business synergies cited, meanwhile, were Meralco’s postpaid subscriber base, data center, prepaid service, broadband over power lines, and new services. In a separate disclosure, PLDT sister firm Metro Pacific Investments Corp. (MPIC) said it was in talks with the PLDT Beneficial Trust Fund to acquire the latter’s 10.2% stake in Meralco. The Beneficial Trust Fund in exchange will subscribe to new MPIC shares so as to become a significant shareholder of the holding company. Mediaquest Holdings, Inc. a unit of the Beneficial Trust Fund of PLDT, has a minority interest in BusinessWorld. - BusinessWorld