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PLDT to buy 52% equity in JG Summit's Digitel

UPDATED 6:35 p.m.) Philippine Long Distance Telephone Co. (PLDT) on Tuesday confirmed the buzz among market and industry players that it is buying a majority stake in the Gokongwei-owned competition, Digitel Telecommunications Philippines Inc.(DTPI) — operator of Sun Cellular. The telecommunications giant will buy a 51.5 percent stake in Digitel Telecommunications for P69.2 billion, the payment of which will be done under a mandatory offering of PLDT shares at P2,500 a piece under the name of DTPI parent JG Summit Holdings Inc. PLDT said it will later announce its decision to conduct a tender offer to minority shareholders — holding 48.45 percent of Digitel stock currently valued at P1.60 per share — in exchange for PLDT shares or cash. Following the acquisition, James L. Go, chairman and CEO of JG Summit Holdings, will occupy a board seat in PLDT, executives announced in a press briefing Monday afternoon. JG Summit Holdings will then hold around 12 percent of the shares of the whole PLDT Group after the transaction is completed. Combined, the two telcos will account for about 67 percent of the local market in revenue terms. Barring disagreements with shareholders and regulatory issues, the telco giant and its lesser competition intend to complete the transaction by the second quarter of the year. A 'very difficult decision' Lance Y. Gokongwei, president and COO of JG Summit Holdings, said it was a "very difficult decision" to sell Digitel. He refused to elaborate, saying it took three years before his company was able to decide on a suitable partner. "The brand equity of Sun Cellular will enhance our mobile offerings, so we wish to preserve this moving forward," said PLDT Group chairman Manuel V. Pangilinan. "We will also retain the unlimited products and services of the group, so that consumers are able to continue benefitting from them." The regulatory environment today is moving toward encouraging consolidation, which begets bigger investments in order to improve broadband penetration, said PLDT's top honcho. "Increasing investments in broadband, specifically mobile broadband, will require scale," he added. Plans for Digitel PLDT said it intends to keep Digitel's mobile operations — Sun Cellular — separate and intact, giving the country's oldest and largest telecommunications company total of three mobile telephone services under its belt aside from Smart and Red Mobile. PLDT said it hopes to make available to Digitel subscribers the depth and breadth of PLDT service offerings, specifically 3G — or third generation cellular technology — and broadband Internet. For its part, Digitel is bringing into the alliance with PLDT some 450,000 subscribers to PLDT’s 1.8 million subscriber base in fixed line operations. Sun Cellular’s number of mobile subscribers is currently pegged at around 14 million. No monopoly Napoleon Nazareno, president and CEO of PLDT and Smart, meanwhile downplayed initial reactions that PLDT is headed toward monopolizing the telco market. "We expect competition to remain very robust given other operators are formidable and well-founded," he said. "We would also have to face growing competition from so-called over-the-top service providers, those that offer social networking, instant messaging and VoIP services," Nazareno said. Some of these "over the top" providers include Facebook, which has eaten up on telcos' text messaging revenues, and Skype, which supposedly caused a sharp decline in telecom firms' international distance dialing revenues. Other providers in the market, like the Lopez-owned SkyCable Corp., are providing new and compelling services that drive competition in the market, Nazareno added. Digitel and JG Summit Holdings earlier Tuesday disclosed they opted for a voluntary trading halt on the Philippine Stock Exchange due to a "major shareholder transaction," fueling speculations that PLDT is indeed buying into the young telco player. ...and then there were two The buy-in effectively leaves two major players in the local mobile telecommunications market: PLDT and Globe Telecom. For its part, Globe issued a press statement just hours after the announcement of the buy-in, saying it remains "focused" on its current strategies and will "build on the momentum that has been created [by the company] since the second half of 2010." "The Digitel and PLDT merger will not fundamentally change our strategy. We stand ready to compete, and to defend and grow our market share," said Ernest L. Cu, Globe president and CEO in the statement. "This industry has always been intensely competitive, and we have been a strong challenger to a dominant incumbent all this time. We will continue to focus on delivering relevant products to our retail and corporate customers, providing differentiated customer service, and enhancing our network to deliver the best experience possible to our subscribers," Cu added. Globe registered a mobile subscriber base of 26.5 million in 2010, up 14 percent from 2009. The company also reported a 1.1-million combined wired and wireless broadband subscribers, up 50 percent in teh same comparable period. — With TJ Dimacali/VS, GMA News