Digitel stocks soar on takeover rumors

MANILA, Philippines - Shares of Digital Telecommunications Philippines (Digitel), the telecommunication arm of the Gokongwei family’s listed flagship firm JG Summit Holdings Inc., shot up 18 percent yesterday on persistent rumors it could be a takeover target.

“The speculation that JG Summit will sell Digitel just wouldn’t let up. Rumors abound that a new company has expressed interest to acquire Digitel,” said Astro del Castillo, managing director at First Grade Holdings Inc.

Digitel soared to an all-time high of P2 yesterday prior to closing at P1.83 each share with a total of 421.21 million shares valued at P775.89 million changing hands.

“The story spreading now is PLDT (Philippine Long Distance Telephone Co.) has made an offer to Digitel and that a deal could be forthcoming,” Del Castillo said.

Earlier, San Miguel Corp. president Ramon S. Ang said the diversifying conglomerate is open to the possibility of acquiring Digitel but said there are no discussions ongoing with the Gokongwei group with respect to the fast-growing telecommunications company.

JG Summit likewise issued a statement, saying it was not in talks with San Miguel, resulting in a decline in the price of Digitel’s share Friday. Yesterday was a totally different story as market pundits amassed Digitel shares on speculation that a deal could be worked out soon.

From only P1.29 last March 17, Digitel has risen by 42 percent as of yesterday.

“It may make sense for a larger competitor to make a bid for Digitel, which has become a force to reckon with in the industry particularly in the mobile phone segment. Digitel, through its Sun Cellular brand, pioneered the unlimited call and text service in the country that forced its rivals to follow suit. With its novel strategy, the company has gained a significant market share,” an analyst at a foreign brokerage house said.

“The attention Digitel has been getting is also due to its good turnaround story. It has sustained its positive operating results,“ the analyst said.

“There was an earlier disclosure that Digitel owners are open to exploring offers. What is worth asking now is how much of their stake are they willing to sell in Digitel,” the analst added.

Digitel grew its profit by 65 percent last year to P429.6 million from only P259.7 million on the back of an 18-percent rise in revenues to P16.54 billion.

The growth in revenues was fueled by a 27.1-percent jump in the wireless segment largely due to the launch of more affordable and innovative products.

Sun Cellular is currently the number three mobile phone provider in the country with around 15 million subscribers, as of the end of last year. Leading the pack is the Smart/TnT group with 45 million subscribers followed by Globe, with over 25 million subscribers.