Philippine Long Distance Telephone Co. (PLDT), along with Globe Telecom Inc., on Monday announced plans to buy out the total equity interest of the telecommunications business of San Miguel Corp. (SMC).
Under the terms of agreement, both companies will acquire a 50-percent equity stake in the SMC telco, further cementing a duopoly in the telecommunications industry.
The deal involves San Miguel subsidiaries that own a prized 700-megahertz frequency.
"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," PLDT Chief Executive Manuel Pangilinan said in a statement.
"This transaction offers a breakthrough opportunity, not only for the companies involved but also for the industry and the country," he added.
"The transaction will enable Globe Telecom to provide enhanced mobile internet services at a lower cost, hence providing significant strategic benefits for consumers, the general public and shareholders of Globe Telecom," Globe said in a separate disclosure to the Philippine Stock Exchange.
Includes P17.02-B debt
According to PLDT, the consideration for the acquisition is pegged at P69.1 billion.
This includes P52.08 billion for a 100-percent equity interest in Vega Telecom Inc. and the assumption of around P17.02 billion in liabilities.
"The agreed consideration for Globe Telecom’s 50 percent interest is P26.4 billion, of which 50 percent of the consideration is to be paid upon closing of the transaction," Globe said in a separate disclosure to the Philippine Stock Exchange.
"The balance would be paid in two equal installments six and twelve months after closing of the transaction," it added.
Vega Telecom owns controlling interests in Bell Telecommunication Philippines, Inc, Eastern Telecommunications Philippines, Inc, Cobaltpoint Telecommunication, Inc (formerly Extelcom), and Tori Spectrum Telecommunication, Inc (formerly Wi-Tribe), and Hi- Frequency Telecommunication, Inc.
The development comes after negotiations between SMC and Australian company Telstra Corp. Ltd. over a planned telecommunications joint venture were scrapped as both companies failed to agree on an equity investment.
"Both SMC and Telstra worked hard to come up with an acceptable resolution to some issues. However, we agreed we can no longer continue with the talks. I believe this is best for all parties," Ramon S. Ang, SMC president and COO, said in March.
PLDT and Globe belittled the collapse of the planned joint venture, saying it has not changed the business landscape of the industry.
Frequencies to improve industry
On the heels of the transaction, PLDT said it will return to the government certain radio frequencies, which will allow for a third competitor to enter the market.
This would definitely improve the telecom industry, Pangilinan noted.
"Other frequencies will be useful for the internet... There is a full spectrum that will be given to us. It will help us in providing better internet service," he said.
"The transaction benefits the public because of calls for higher quality and faster internet," he added.
Certain radio frequencies will have to be relinquished in the 700 MHz, 850 MHz, 2500 MHz, and 3500 MHz bands and returned to the government through the National Telecommunications Commission (NTC).
"These radio frequencies to be returned by subsidiaries of Vega Telecom to the NTC will be sufficient, together with radio frequencies already held by the NTC, to allow for a third-party operator to enter the market," according to PLDT.
"The acquisition will thereby help the NTC and the Philippine government provide for a better utilization of available radio frequency spectrum for mobile services, which will benefit consumers more quickly," it added. — With Reuters/VVP/VDS, GMA News