FPHC unit, Piltel seal accord for Meralco stake

MANILA, Philippines - First Philippine Utilities Corp., a wholly-owned subsidiary of First Philippine Holdings Corp. (FPHC), has executed a share purchase agreement with Pilipino Telephone Corp. (Piltel) covering the sale for P20.07 billion of 20 percent of the outstanding capital stock of the Manila Electric Co. (Meralco).

The sale of 223 million common shares of Meralco at P90 per share is in accordance with the investment and cooperation agreement earlier entered into by FPHC with the Philippine Long Distance Telephone Co. (PLDT).

PLDT owns Smart Communications Inc. which in turn owns 92.81 percent of Piltel.

Piltel shareholders approved last June 30 the acquisition of a 20-percent stake in Meralco. The purchase was implemented through a special block sale/cross sale executed at the Philippine Stock Exchange (PSE).

The stockholders also gave the go-signal to the change in Piltel’s business from being a telecommunications service provider to a holding company for the Meralco shares.

Piltel chairman Manuel V. Pangilinan said that much of the P20-billion price tag for the purchase of a 20-percent shareholding in Meralco from the Lopez Group will be internally generated, with a small amount of borrowings. Piltel has already advanced P2 billion of the purchase price.

Also approved by the shareholders yesterday was the sale by Piltel for P11.5 billion of its telecommunications business to Smart. Of the P11.5 billion to be paid in cash and sourced from Smart’s corporate funds, P8 billion will be for the sale of the Piltel trademark while P1.2 billion will be for the transfer of Piltel’s 16.6 million subscriber base to Smart and P2.3 billion for the sale of its GSM fixed assets.

Together with the PLDT Beneficial Trust Fund’s 10 percent stake in Meralco, the PLDT Group’s shareholdings in Meralco now amount to 30.2 percent. PLDT parent Hong Kong-based First Pacific Co. also has shares in Meralco.

The PLDT BTF intends to transfer its Meralco stake to Metro Pacific Investments Corp. (MPIC). And because the PLDT group has already put a 20-percent cap on its shareholdings in Meralco, Pangilinan said any additional purchases will have to be made by MPIC.

Last May 26, with the cooperation of the Lopez Group and the PLDT BTF, Pangilinan, ePLDT president Ray Espinosa, and PLDT president Napoleon Nazareno were elected Meralco directors, with the PLDT Group’s nominee Betty Siy named Meralco’s chief finance office.

Pangilinan pointed out that the P90 per share purchase price was based on their own assessment of the intrinsic value of Meralco, the latter’s prospects as a power company as well as the synergies that could arise on a long term, as well as the dynamics with the share owners First Philippine Holdings. “We are acquiring the shares at that price both for defensive and affirmative reasons,” he said.

Among the synergies identified between PLDT and Meralco, Pangilinan pointed out, is the possibility of Meralco tapping into PLDT’s experience on prepaid and wireless billing. “The Aboitiz group is pilot testing the offering of prepaid electricity. We want to look at their experience but we will also be conducting our own test,” he said.

He also revealed that Meralco will soon test in the Manila area the possibility of providing broadband service over power lines.

PLDT and Meralco are creating teams that would explore each area of synergy.

“The PLDT Group could explore in partnership with Meralco the possibility of offering broadband services over power lines. For its part, Meralco can tap into the PLDT Group’s considerable experience in the prepaid and mobile commerce fronts to offer new services such as prepaid electricity as well as wireless bill payments and meter readings,” Piltel told its shareholders.

Pangilinan also stressed that PLDT wants to ensure that its wires, which are in 546,000 of Meralco’s poles in Metro Manila and five outlying provinces, are strong. “It will cost P8 billion to replace those poles and at least three years to obtain the rights,” he said.

To provide the minority shareholders of Piltel holding a total of 7.19-percent stake an exit as the company ceases soon to be a telco provider, Smart has offered to acquire their shares at P8.50 each.

Pangilinan also emphasized that they have not made up their minds as far as the planned delisting of Piltel once Smart consolidates its stake. “Our focus is on the Meralco investment by mid-July. But those who will not avail of the tender offer face the prospects of delisting,” he said.