MVP assumes active role in First Pacific, sells subsidiary

In its first major transaction under chief executive Manuel V. Pangilinan who has taken a more active role in management recently, Hong Kong-based First Pacific Co. (FPC) has sold its 49-percent stake in Escotel, currently the seventh largest mobile telecommunications operator in India, for $15 million (HK$119.9 million), to Idea Cellular, one of India’s major telcos.

Pangilinan, who was named chief executive officer of FPC recently after being executive chairman, is now running the show in Hong Kong and in the Philippines although by next month, he is expected to relinquish his position as president of the Philippine Long Distance Telephone Co. (PLDT) and instead be named its chairman so that he can devote more time to FPC.

With the sale of FPC’s stake in Escotel, it is believed that the group can now focus more on its telecommunications investments in the Philippines, particularly in PLDT which owns wireless subsidiaries Smart Communications Inc. and Pilipino Telephone Inc. (Piltel). FPC has a 24.4-percent controlling stake in PLDT.

FPC management said the proceeds of the sale will be for general corporate and working capital purposes although analysts said the sale is part of FPC’s plan to build up its war chest in preparation for its expansion mainly in the Southeast Asian market.

FPC is currently finalizing a regional strategy focusing on telecommunications and food, using as the core PLDT and Indonesia’s Indofood, respectively. As part of the strategy, the group is now looking for possible acquisitions and partnerships in the region to improve its presence.

FPC entered into an agreement with Idea Cellular last Jan. 15 for the sale of its 49-percent stake in Escotel for HK$119.9 million payable in cash on completion of the sale. Under a separate agreement, Escorts which owns the remaining 51 percent will simultaneously sell to Idea. Escorts, a company incorporated in India, is one of India’s major industrial houses with interests in agri-machinery, telecommunications, healthcare and financial services.

Completion of the sale is expected to take place by the second quarter of this year. The sale, being a major transaction, is conditioned on the approval by FPC’s shareholders in a general meeting.

FPC’s management, headed by Pangilinan as chief executive and Anthoni Salim as chairman, said that although the group remains committed to the Asian telecommunications sector which will remain a core business of the group, the board considers that its resources would be more profitably employed in markets where First Pacific’s operations can attain market leadership positions which are unlikely to be achievable in the increasingly competitive Indian mobile telco market.

Unlike Escotel, the other investments of FPC are leaders in their respective markets. PLDT remains the Philippines biggest telephone company as well as the leader in data services while Smart is the country’s biggest mobile phone service provider in terms of number of subscribers. Indofood based in Indonesia is the world’s biggest noodle maker.

"In view of the highly competitive environment of the Indian mobile telecommunications market and the consolidation occurring among operators in the market, the board believes that increased shareholder value for First Pacific shareholders can best be achieved by a disposal of its interest in Escotel at this time," it said.

Escotel is currently the seventh largest of the 12 mobile telecommunications operators in India with 826,000 customers as of Dec. 31, 2003. It is based in New Delhi and operates mobile digital cellular telephone services in GSM networks. In 2002, the company registered losses amounting to $13.4 million compared to $22.4 million in 2001.