Philippine telecom giants PLDT and Globe have reached an agreement to acquire the telecommunications assets of diversified conglomerate San Miguel Corp. in a deal worth P69.1 billion, the three companies said in separate announcements on Monday.
The surprise development came after SMC and Australia’s Telstra Corp. ended talks earlier in the year on joint investment in a new mobile network in the Philippines.
In a disclosure to the Philippine Stock Exchange, PLDT said it would acquire 50 percent equity interest of the telecommunications business of SMC, with Globe acquiring the remaining 50 percent.
In a separate disclosure, SMC said that it has executed definitive agreements with Pangilinan-led PLDT and Ayala-owned Globe Telecom for the acquisition of the conglomerate’s interests in Vega Telecom Inc., valued at P69.1 billion.
The deal involves SMC subsidiaries that own a prized 700-megahertz frequency—the spectrum is the “real estate” on which telecommunication operators develop their respective network to deliver faster wireless Internet services to customers.
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.
Under the agreement, PLDT would acquire 50 percent equity interest of the telecommunications business of SMC, with Globe acquiring the remaining 50 percent.
Both telecom giants will pay P52.08 billion for all the shares and assume about 17.02 billion of liabilities of Vega Telecom Inc.
On Monday, PLDT chief executive officer Manuel V. Pangilinan said the company made the first payment of P52.85 billion or 50 percent of the equity payment price. The second payment of 25 percent will be due on December 1, 2016 and the remaining 25 percent on May 30, 2017.
Pangilinan said that the acquisition would provide significant benefits to PLDT, Smart, TNT and Sun Cellular customers, further improve Internet and data services for the public, and speed up the country’s overall development efforts.
“Capacity and coverage, both indoor and outdoor, will be expanded and enhanced. Customers will progressively experience faster Internet and higher call and data quality across the fixed and mobile networks of PLDT and Smart,” Pangilinan said in a statement.
“This will enable PLDT to provide attractive mobile connectivity and digital services to its consumer and enterprise customers at affordable prices. Stronger networks and connectivity are key enablers for individual and enterprise sector productivity and cost efficiency,” he added.
The executive also said that PLDT has an execution team already in place, which will enable PLDT to integrate the acquisition rapidly into telco’s current network, and capex plans.
“It is fully our intention to improve Internet access and coverage nationwide on an accelerated basis,” Pangilinan said.
Pangilinan said that access to these much-needed radio frequencies, especially the 700MHz, is likely to raise PLDT’s capex by $100 Million for 2016 and 2017.
In a separate statement, Globe Telecom President Ernest Cu said that the agreement involves the return of some frequencies to the government under terms of the agreement will allow for a third competitor to enter the cell phone services market.
“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,” the executive said.
“The acquisition will allow Globe to improve services, which means Globe can immediately unlock benefits of underutilized frequencies,” Cu said.
Globe Telecom has committed $750 million CAPEX to support growing demand for mobile data and home broadband connectivity across different technologies.
It also set to deploy fiber optic cables to 20,000 barangays to provide faster and more reliably Internet services to 2 million homes nationwide.
PLDT and Globe have caused and have undertaken to cause the acquired companies to return of unused spectrum assets covering a complete set of 2G, 3G, 4G and potential 5G frequencies preserves the government’s option to enable a future player to offer telecommunication services.
The 700 MHz band, located above the TV broadcast channels, penetrates buildings and walls and covers larger areas. Mobile service providers in other countries have been using the spectrum to offer mobile broadband services.
Aside from 700 Mhz, San Miguel Group owns spectrum under the 900 Mhz, 800 Mhz and 1,800 Mhz.
SMC owns almost all of the 700 MHz spectrum (694 MHz to 790 MHz), previously assigned for analog television broadcasting before it was shifted for telecommunications use as TV migrated to digital.
In a statement, SMC said, “After exploring possible joint venture deals with other potential partners, SMC was convinced that the proposal presented by both PLDT and Globe is the most expeditious, feasible and in the best interest of the consumers, its stockholders and all the parties involved given the current situation.”
SMC added its decision was contingent on the assurance from the two carriers that they will implement SMC’s mobile broadband project faster than otherwise would be the case in order to deliver better, affordable services to consumers and enable the next wave of network upgrades for the carriers.
“This is a sacrifice we have to make to finally unlock the full potential of our high-quality, mobile broadband spectrum faster and allow consumers access to its benefits through the combined resources, network and expertise of the two carriers,” SMC president and COO Ramon S. Ang said.
PLDT Group holds frequency in the 800 Mhz, 900 Mhz and 2,100 MHz bands while Globe owns frequency in the 900 Mhz, 1,800 Mhz and 2,100 Mhz bands.
PLDT and Globe earlier asked the National Telecommunications Commission to reassign the 700 MHz to other existing telecom players. Utilizing the 700 MHz would allow the deployment of a high-capacity LTE-based wireless and fixed-broadband network to deliver higher data rate and LTE broadband service.
San Miguel president Ramon Ang earlier turned down the request of Globe and PLDT to share some of its 700 Mhz, as it plans to offer its own mobile broadband this year.
San Miguel and Australia’s Telstra Corp, however, ended talks on a $1-billion joint venture to offer wireless services in the country after they failed to agree on terms.
On Monday, the NTC has approved the use by Smart Communications, Inc. of certain radio frequencies in the 700MHz, 900MHz, 1800MHz, 2300MHz, and 2500MHz bands.
“This transaction offers a breakthrough opportunity, not only for the companies involved but also for the industry and the country. 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 At the same time, it leaves the door open for new entrants into the industry. Taken together, this will enable the industry to better support the country’s development efforts—especially significant with the onset of a new government,” Pangilinan said.