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PLDT-Digitel deal OK’d; regulator sets conditions




Posted on October 27, 2011


PHILIPPINE Long Distance Telephone Co. (PLDT) yesterday completed its delayed takeover of rival Digital Telecommunications Philippines, Inc. (Digitel), saying regulators had approved the transaction.

The National Telecommunications Commission (NTC) confirmed that it had greenlighted the P69.2-billion deal -- announced early this year and originally scheduled for completion in June -- but also put in place several conditions that included the dominant telco’s divestment of some of its frequencies.

PLDT said it had accepted the NTC’s requirements, while second-ranked Globe Telecom, Inc. -- which had questioned the purchase and claimed that it would lead to a return to a monopoly -- said it was satisfied that regulators had moved to protect consumers and promote fair competition.

PLDT’s acquisition of JG Summit Holdings, Inc.’s 51.55% stake in Digitel will give the dominant telco some 70% of the domestic mobile market, leaving Globe about 30%. PLDT said it would soon announce a tender offer for the rest of Digitel.

Shortly after PLDT’s announcement, 3.277 billion shares of Digitel changed hands via a cross sale in the stock market at P1.6033 per share.

In exchange for the Digitel stake, JG Summit will get 12.9% of PLDT, comprising 27.7 million common shares at P2,500 apiece.

PLDT also acquired the zero-coupon convertible bonds issued by Digitel to its parent and assumed P34.1 billion in advances made by JG Summit to Digitel.

“After due evaluation of the various factors and issues involved, it has granted the application for approval of the sale and transfer to the PLDT of initially approximately 51.55% equity in Digitel,” NTC commissioner Gamaliel A. Cordoba said in a press conference.

The NTC decision came a day before a 90-day review period was to expire. The protracted regulatory approval period had prompted PLDT and JG Summit to thrice suspend the deal’s planned completion.

The regulator said PLDT would have to continue Digitel’s unlimited text and call services. “Regarding the unlimited services, we want it to be permanent, continuous and we want a nationwide-reach [for these services],” Mr. Cordoba said, adding that Digitel’s mobile service should be kept separate.

PLDT was also required to divest 10 megahertz of 3G frequencies held by Connectivity Unlimited Resource Enterprises, Inc. (CURE), a unit of subsidiary Smart Communications, Inc. CURE’s frequencies will be auctioned off and PLDT will not be allowed to bid, Mr. Cordoba said.

“Another condition requires PLDT and Digitel to continue providing high quality service to their respective subscribers,” he said.

“With their combined expertise and resources, it is expected that PLDT and Digitel will attain improved capability in providing better quality and more affordable services to their fixed line, mobile, wireless and broadband subscribers,” he continued.

“We would like to assure the general public that the PLDT-Digitel transaction will not result in a monopoly and bring about unhealthy business competition that will be detrimental to the interests of millions of telecom users and subscribers.”

In support of this, Mr. Cordoba said the NTC had ordered the lowering of interconnection charges for text messages. The new rate, according the Memorandum Circular 02-10-2011, is P0.15 per text message from P0.35.

Complete landline interconnection between PLDT and Globe in provinces will also be pursued, he said.

Mr. Cordoba said the regulator was working on guidelines for local IP peering and would be conducting quarterly monitoring of telco providers’ quality of services, enforce rules on minimum Internet speed, and promulgate rules for “significant market power.”

“We believe these provisions are enough for consumer protection. There are also pending memorandum circulars such as lowering of interconnection for voice services and for landline services,” he said.

In a disclosure, PLDT said it and Digitel had “manifested their acceptance of the conditions contained in the decision”. In a separate statement, the telco said it would conduct a mandatory tender offer for the remaining 48.45% of Digitel on a date yet to be announced. If the offer is fully taken up, the transaction value will increase to P74.1 billion.

Asked to comment on the NTC decision, Globe President and CEO Ernest L. Cu said the “general terms are acceptable.”

Globe, in a statement, said: “the approval... with condition to divest PLDT’s 10Mhz 3G frequency is a progressive step for the NTC in promoting consumer welfare and fair competition.”

PLDT shares closed 1.04% or P24 higher at P2,330 apiece yesterday, while JG Summit Holdings was up 1.78% or P0.45 to P25.70 per share. Digitel gained 0.65% or P0.01 to close at P1.54 per, while Globe Telecom shares lost 0.89% or P8 to end the day at P892 apiece.

Mediaquest Holdings, Inc., a subsidiary of the Beneficial Trust Fund of PLDT, has a minority stake in BusinessWorld. -- K. A. Martin with a report from Reuters