Philippines' PLDT, Globe to buy San Miguel telecoms assets in $1.5 billion deal

Monday, May 30, 2016

The Philippines' top two telecoms firms agreed to buy conglomerate San Miguel Corp's (SMC.PS) assets in the sector for nearly $1.5 billion in a joint deal they said will significantly upgrade slow internet services that have been a drag on one of Asia's fastest-growing economies.

In separate statements on Monday, Philippine Long Distance Telephone Co (TEL.PS) and Globe Telecom Inc (GLO.PS) said they will acquire subsidiaries of food-to-power group San Miguel that include a prized 700-megahertz frequency. The transaction is valued at 69.1 billion pesos ($1.48 billion), they said.

PDLT and Globe will each acquire 50 percent of the San Miguel telecoms business just a few months after San Miguel's attempts to seal a joint venture with Australia's Telstra Corp Ltd (TLS.AX) collapsed. The deal is subject to shareholder and regulatory approvals.

Internet connectivity in the Philippines is among the slowest in the world, according to data analytics firm Ookla, despite the country's rapid economic growth. The country's president-elect, Rodrigo Duterte, last week warned telecoms players to shape up or face the prospect of foreign competition.

While the deals will reinforce the leading pair's grip on the market, PLDT and Globe both said they will return certain radio frequencies to the government, allowing for a third competitor to enter the market. Speaking at a news conference after the deal was announced, Ray Espinosa, PLDT's head of regulatory affairs, said the deal won't require the approval of the Philippines' Congress.

PLDT shares were up 6.8 percent at 0239 GMT (10:39 a.m. EDT) while Globe rose 4.2 percent. San Miguel shares were flat after having risen as much as 3.4 percent earlier.

While additional bandwidth will be good for the incumbent telecom players, sector watchers said, new entrants are seen facing steeper hurdles.

"It's not that easy to come in," Wilson Sy, director of Philequity Management Inc, a Manila-based fund management company that handles more than 20 billion pesos ($427 mln) in assets, told Reuters.

"Capital expenditure is so huge...Additional players will find it difficult versus those who are entrenched."


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