Globe seeks approval of Islacom share swap

Leading mobile phone company Globe Telecom is asking approval from the Securities and Exchange Commission (SEC) and the Philippine Stock Exchange (PSE) for the share swap transaction and listing of new shares, respectively, necessary for the acquisition by Globe of Isla Communications (Islacom).

Islacom is a local provider of GSM cellular, fixed line, and international long distance services whose major shareholder is Deutsche Telecom AG (DT).

Globe officials said they expect the financial close of the Globe-Islacom combination to happen sometime in June this year.

The combined entity is expected to realize cost savings from the transaction amounting to around $31 million a year, aside from a reduction in capital expenditure of an initial $125 million over the next 18 months due to the elimination of duplicate capital spending on the cellular network.

Also in accordance with certain covenants of its credit facilities, Globe has asked for lenders’ consents to the transaction and expects to receive all the consents by the end of May.

Under the agreement signed last year by Ayala Corp. and Singapore Telecom International (STI) which are the major stockholders of Globe, and Deutsche Telecom, Globe will issue new common shares to DT and will issue new preferred shares to Asiacom that will be 60-percent owned by Ayala, 20 percent by STI, and 20 percent by DT.

Also last year, Globe and its principal shareholders Ayala Corp. and STI, and Islacom and its major stockholders Asiacom and DeTeAsia Holding GmbH (a wholly owned subsidiary of DT) entered into a general agreement for a combination of the business and operations of Globe and Islacom.

The general agreement contemplates that Globe will issue a package of new Globe common and preferred shares to Islacom’s shareholders in exchange for 100 percent of the issued and outstanding stock of Islacom.

The National Telecommunications Commission (NTC) approved the share-swap transaction last February.

Last March, Globe and Islacomís major shareholders signed an agreement whereby DT and Asiacom will subscribe to 28.83 million new common and 158.5 million preferred shares of Globe in exchange for 100 percent of Islacomís stocks. The agreement is subject to SEC and PSE approval.

Also in March, Globe sought SEC approval for an increase in its authorized capital stock from P5 billion to P11.25 billion to create the additional shares to effect the Globe-Islacom share-swap agreement.

However, effective last April 1, Globe and Islacom have already substantially aligned back offices and centralized businesses as part of the operational integration.