Manila: San Miguel Corp President Ramon Ang gave up his telecom ambitions by agreeing to a $1.5 billion deal that raises money for his energy, infrastructure and beer conglomerate’s expansion.
Philippine Long Distance Telephone Co. and Globe Telecom Inc agreed to buy the telecommunications business of San Miguel Corp for about 70 billion pesos ($1.5 billion), including debt, according to statements from the companies Monday. PLDT and Globe are each taking a 50 per cent stake in the business and saw their shares soar after the announcement.
San Miguel is selling its telecommunication business two months after it ended talks with Telstra Corp for a joint investment in a new mobile network in the Philippines after they failed to agree on terms. The conglomerate built a phone network with Telstra’s help to challenge PLDT, the former telephone monopoly, and Globe, the nation’s only other wireless carrier.
“It is a master stroke for Ang and San Miguel,” said Jonathan Ravelas, chief market strategist at Manila-based BDO Unibank Inc “They will be getting a large sum and sparing themselves from a bruising fight in an industry that is getting more competitive and bloodier had Ang pushed through with telecoms.”
Under the agreement, PLDT and Globe will pay 52.08 billion pesos for all the shares of the unit, Vega Telecom Inc, and assume about 17.02 billion of liabilities, according to the statement. Vega owns an 87 per cent stake in Liberty Telecom Holdings Inc, the unit formed by San Miguel. Vega also owns direct and indirect stakes in companies including Bell Telecommunication Philippines Inc, Eastern Telecom Philippines Inc, Express Telecom and Tori Spectrum.
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, PLDT said in a statement.
Before Monday’s agreement, PLDT and Globe had raised capital spending to boost their digital network capacity before San Miguel’s entry. They had also asked the government to reallocate the 700 megahertz spectrum, which had been largely assigned to companies related to San Miguel.
PLDT jumped as much as 11 per cent, the most since March 14, as of 11:28am in Manila trading. Globe climbed as much as 6.5 per cent. San Miguel was little changed.
The acquisition will allow Globe to improve services, President Ernest Cu said in a statement. He said the agreement means Globe can “immediately unlock benefits of underutilised frequencies.”
“This will enable existing operators to provide significantly improved internet and data services,” PLDT Chief Executive Officer Manuel Pangilinan said in the statement. “At the same time, it leaves the door open for new entrants into the industry.”
