MANILA, Philippines - Philippine Long Distance Telephone Co. (PLDT) chairman Manuel V. Pangilinan has called on government to “adhere to the principle of protecting consumers, rather than market rivals” in assessing the merits of PLDT’s proposed acquisition of rival Digital Telecommunications Phils. Inc. (Digitel).
The National Telecommunications Commission (NTC) is currently reviewing the merits of an application filed by both PLDT and Digitel for the sale and transfer to PLDT of initially around 51.55 percent equity in Digitel, which is a requirement under the Public Services Act.
Aside from NTC approval, PLDT is also seeking approval by the Securities and Exchange Commission of the valuation of the assets, by the Philippine Stock Exchange of the block sale of the Digitel shares, and confirmation by the SEC that the issuance of the new PLDT shares to Digitel’s parent JG Summit and to minority owners of Digitel is exempt from the registration requirement of the Securities Regulation Code, Pangilinan said.
He said the NTC approval is the most crucial since the rest are just technical requirements. “It’s a matter that’s beyond our hands. The NTC hearings are set sometime next week. After that we can have a better idea whether we can close by the end of the month,” he said.
While PLDT has already secured its shareholders approval of the acquisition of Digitel and the issuance of new PLDT shares as payment, Pangilinan said Digitel is in the process of securing approval from its creditors for the change of control.
“Industry competition from present and future players will not vanish or diminish for so long as two competition principles are sustained by regulators, namely: no barrier to entry of new players and, customers remain contestable,” Pangilinan emphasized during PLDT’s annual stockholders meeting Tuesday.
He pointed out that in many parts of the world, regulators have taken a more tolerant view of market consolidation, reflecting their appreciation of the need for economies of scale in this new investment cycle, and the multiple threats of cross-border competition coming from global Internet companies.
“If broadband were to be propagated to the less profitable rural areas, a consolidated telco model is more economically efficient than a fully competing one,” Pangilinan said.
He noted that in the emerging industry landscape characterized by a continuing shift to bucket and unlimited pricing plans for voice, testing and broadband Internet services; and rising popularity of online services such as social networking and voice over IP, competition has become multi-dimensional.
He stressed that a new investment cycle for telcos worldwide has arrived, where revenues are declining, capex requirements increasing, and economies of scale both in size and scope are needed to realize efficiencies and increase profitability.
Pangilinan explained that market consolidation is now occurring across the globe, such as in Poland, Russia, Pakistan, Bangladesh, Norway, the US and Canada, driven by lack of growth in previous years which is forcing telcos to seek scale-related acquisitions. “Further, the anticipation of growth-inducing investment in broadband reinforces the advantages of size and scale,” he added.
“Globally, there are increasing number of market consolidation happening, The regulator is getting a more tolerant view of market consolidation. They appreciate that revenues are dropping and capex requirements are rising because of technologies. It is really scale that is needed to be able to support the new kind of business model needed for the future,” he said.
Thus, in order to return PLDT to profitability, Pangilinan stressed that they had to change the game with the move to acquire Digitel.
Pangilinan reiterated that PLDT will keep Digitel a separate entity and will continue unlimited offerings so as not to deprive Filipinos of the affordable services they desire.
Aside from acquiring an initial 51.55 percent stake in Digitel held by the JG Summit group, PLDT will make a tender offer for the remaining 48.45 percent held by public shareholders, at a price of P1.6 per Digitel share, payable either with PLDT shares priced at P2,500 per share or in cash at the option of the Digitel shareholder.
Pangilinan said PLDT may have to borrow at most its P4 billion for the tender offer of non-JG Summit shares.
Meanwhile, asked whether Digitel will be delisted from the PSE, Pangilinan said this will depend on the acceptance level of the minority shareholders of Digitel. “Just like Piltel, it remains listed because there are minorities that do not accept our offer to acquire their shares even if the public float is very minimal. It is possible that it could happen to Digitel. We do not know yet if we can get all the minorities. We prefer it to be delisted but it really depends on the minority,” he explained.
He also revealed that they have not conducted a due diligence of Digitel because they are not allowed to at this point being still competitors.