Ex-Sun owners to go into energy

One of the biggest news that hogged the headlines last week was the P69.2-billion buy-out by the Philippine Long Distance Telephone Co. (PLDT) of Digital Telecommunications Philippines Inc. (Digitel). The telecom firm markets the Sun Cellular brand that is popularly used by the low-income consumers of mobile phone services.

As in any other megabuck business deals, the PLDT-Digitel buy-out agreement came only after the ink dried on the contract between the principal signatories, Manny Pangilinan, chairman of the PLDT Group, and James Go, chairman and chief executive officer of JG Summit Holdings, the mother company of Digitel.

The transaction was immediately made public and if we based it from the official press releases from both parties, the Gokongweis got a good price for Digitel. They swapped it for a substantial stake and got one seat in the board of directors of the PLDT. James Go gets to join the PLDT board.

On the other hand, Pangilinan will fortify PLDT’s hold of the telecom industry with the acquisition of Digitel, which prides itself as the country’s third largest mobile operator. PLDT operates its own mobile phone firm, Smart Communications, which is recognized as one of the country’s two telecommunications giants (the other is Ayala-owned Globe Telecom).

For many Sun subscribers, the “unli” offer that Digitel started was the best deal that students and other low-income mobile phone consumers could ever afford and avail themselves of within their limited budget for extra expenses. Filipinos have become dependent on mobile phones; owning one is now a necessity and no longer a luxury. 

Beyond the personalities and the soundness of this business deal, the immediate public reaction was common among users of Sun Cellular, including my twin sons’ yaya of 16 years. When she heard the news, she immediately asked what would happen now to her “unli,” or the unlimited calls and text messages offered by Sun.

After these trendsetting “unli” offers by Sun Cellular, Smart and Globe followed suit and even enhanced their respective “unli” versions for both their respective prepaid and postpaid subscribers. In fact, it is no industry secret that both Smart and Globe have been literally trying to make Digitel’s Sun set.

In official statements, top PLDT executives though quickly doused cold water on fears that PLDT would gradually phase out Sun’s popular unlimited calls and text services. And should this happen, naturally it will result in higher telco charges.

“(It’s) not going to happen,” PLDT and Smart Communications president Polly Nazareno curtly said as a reassurance. We hold Nazareno to this official commitment to PLDT’s plan to keep offering Sun’s “unli” packages and to further improve them. Nazareno explained there’s a market for these services and that PLDT aims “to be the best in serving that market.”

That’s because PLDT’s acquisition of Sun Cellular will give it a commanding lead in the mobile phone industry. The estimated 45 million subscribers of Smart will be combined with the 15 million subscribers of Sun Cellular. Globe has an estimated 25 million plus subscribers. The Ayala Group, however, is not without any ally because it has the backing of cash-rich Singapore Telecom.

I read somewhere the statements made by Globe Telecom president Ernest Cu who was quoted as saying that Globe is no stranger to a David-versus-Goliath fight and has long been a “strong challenger to a dominant operator all this time.”

Pangilinan, however, is the first to admit he expects the competition in the telecom industry to remain “very robust.” Even after acquiring Digitel, the PLDT boss candidly pointed to competition arising from “new entrants (that) are formidable and well-funded.”

Specifically, he cited the growing competition from so-called “over the top” or OTT service providers that offer social networking, instant messaging, and VoIP or Voice over Internet Protocol services.

The OTT service providers ride on the broadband networks of telcos in order to offer services that compete with traditional telecom services. These are the global Internet giants like Google, Facebook, Yahoo! and Twitter. So rather than using text messaging and spending P1 per text locally, people send greetings via Facebook or Yahoo Messenger, or call overseas via Skype. Certainly, these OTT alternatives make them a much cheaper means of communication.

Also prospecting for “new entrants,” PLDT’s top honcho clearly points to another potential rival coming from the group of Ramon Ang, president of San Miguel Corp. (SMC). For a while, speculations about a Digitel takeover pointed toward the direction of SMC. This was after Ang much earlier announced that the brand-new mobile broadband network that his group was building would soon make a “huge difference.”

On a micro-economic view, we could not still totally rule out concerns by doubting Thomases if PLDT would keep Sun intact going long enough for people to become complacent and not notice “unli” services fade away.

With PLDT now operating Digitel, it would be reasonable to also expect they will actually make Sun services even better. It’s clearly now in PLDT’s interest to make Sun shine brighter, pun intended.

On macro-economic terms, the sale of Digitel to PLDT by JG Summit raised fresh funds for the Gokongweis to go into other capital-intensive ventures as announced by James Go last week. Go spoke of going into the power production business and other priority public-private partnership projects being offered by the administration of President Benigno “Noynoy” Aquino III.

Definitely, it is a plus factor to get Filipino capitalists to go into power generation in the midst of the looming recurrence of a power supply shortage in the Philippines. Telecom services have already reached their saturation point in our country with so much “unli” versions to encourage more consumption.

What we badly need is more money invested in energy generation to bring down the cost of doing business here and have cheaper electricity for households. Hopefully, the ex-Sun owners would really go into energy projects.