• A P52-B telecom deal



    IT is up to the public stockholders who trade on the Philippine Stock Exchange to judge for themselves who between the seller, San Miguel Corp. (SMC), and the buyers, Philippine Long Distance Telephone Co. (PLDT) and Globe Telecommunications Inc., would benefit more financially from the P52-billion telecommunications deal.

    The question that the public may also want to ask is how PLDT and Globe Telecom would divide the telecom assets that SMC decided to liquidate and focus more on power and energy ventures. Will the two telecom competitors-turned-allies form an alliance in managing their newly acquired assets?

    The answer, or answers to all questions that will be asked of the deal, will be known when government regulatory approvals shall have been put in place. Otherwise, the Globe-PLDT takeover of SMC’s telecom assets remains simply a deal that requires government regulatory approval.

    As a neutral observer of the stock market, Due Diligencer won’t and cannot prejudge the P52-billion transaction. Again, it is you, the public, who are in a better position to decide how this would affect the financials of both SMC and PLDT.

    Nevertheless, Due Diligencer is reporting the deal and did a series of computations based only on available disclosures. Hopefully, there would be a need for a follow-up piece to elaborate this article.

    For the public to fully appreciate the computations, Due Diligencer is presenting the basics such as the capital profile of the parties involved in what could be the biggest and only sale of telecommunications assets in this country.

    Capital profiles
    Liberty Telecoms Holdings Inc. (LTHI) has an authorized capital stock consisting of 6.8 billion shares, which, in turn, are divided into 1.45 billion common shares and 5.35 billion voting preferred shares. As of March 31, it had 6,537,260,038 issued and outstanding capital stock consisting of 1,293,656,429 common shares and 5,243,603,609 voting preferred shares.

    Vega Telecoms Inc. is the parent company of Liberty Telecoms. It owns 6.371 billion of LTHI’s issued and outstanding capital stock, equivalent to 97.462 percent. Its ownership consists of 1.128 billion LTHI common shares, or 87.177 percent of outstanding common shares and 5.244 billion LTHI voting preferred shares, or 100 percent of outstanding voting preferred shares.

    Vega Telecom is a wholly owned subsidiary of San Miguel. It increased its holding in Liberty Telecoms after buying 426.8 million common shares and 2.908 billion preferred shares on Sept. 2, 2015 from existing stockholders. The additional acquisitions strengthened its control to 81.17 percent of common shares and 100 percent of preferred shares. It said in a filing that it currently controls the equivalent of 97.46 percent of voting shares in Liberty Telecoms.

    P52-B deal
    In a PSE posting dated May 30, San Miguel disclosed the liquidation of its telecom assets by selling Vega Telecom, which holds LTHI shares. Vega is an SMC wholly owned unit.

    The deal would cost PLDT—and enrich SMC by—a total of “P52,080,764,982 inclusive of outstanding advances and the assumption of liabilities of Vega and its subsidiaries amounting to P17,021,535,948.” The acquisition translates to P8.174 per share of 6.371 billion Vega-held common and preferred shares.

    Since P52.081 (rounded off) billion included “outstanding advances and liabilities of Vega and its subsidiaries amounting to P17.025 billion, the subtraction would result in P35.059 billion. Dividing P35.059 billion by 6.371 billion shares would lower the per share price to P5.503.

    For comparison: In 2015, a PSE historical market report showed 736.973 million LTHI shares were traded during the year on value turnover of P1.9996 billion, for an average of P4.995 per share.

    Market profile
    The historical data, which PSE keeps on file, showed SMC’s surge to a high of P82.80 on May 31 on value turnover that topped the 2-million peso market at P2.2015 million. The stock closed at P82.

    The day before, SMC opened at P76.50, peaked at P80.70, dropped to a low of P75.90 and closed the session at P80.30 on value turnover of P2.128 million.

    On June 1, SMC was back below the million-peso turnover level to where it was before the SMC-PLDT deal. It opened at P81, hit a high of P81.50, fell to a low of P79.55 and closed at P79.75, which, however, was still higher than the stock’s close of P75.90 on May 27.

    Were the public investors excited over San Miguel’s “loss” of the financially losing Liberty Telecom that could be hurting SMC’s profitability?

    On the other hand, PLDT hit a month’s high of P2,090 on May 31, up from the previous day’s high of P1,940 on value turnover of P3.573 billion, of which foreign buying totaled P197.147 million, or 5.517 percent. That turnover was a big jump from the May 27 level of P948.173 million, of which P371.5685 million, or 39.188 percent, came from foreign buying. The stock closed at P1,900 on May 31, down slightly from the May 30 finish of P1,901.

    Hopefully Due Diligencer would be able to complete the analysis of the Globe-PLDT deal with SMC in the next piece, which would need more researches for background materials.



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