Risk sharing broke SMC-Telstra talks

Talks on a telecommunications joint venture between San Miguel Corp. and Australian mobile telephone service provider Telstra fell through after the latter insisted on receiving a full refund of its investment should the deal run into regulatory problems.

This, the Inquirer learned, was the deal breaker that caused the heads of both firms to call off long-running negotiations, even while committing to cooperate on technological issues going forward.

“Telstra wanted a guarantee that its $1 billion [investment] will be returned to it intact in case the venture runs into problems regarding the 700 MHz dispute for example,” a source said, referring to the controversial 4G frequency that telecommunications rivals Globe Telecom and PLDT were asking the government to farm out.

“That was what the Telstra CEO meant when he said there were risk-reward issues that they couldn’t agree on,” said the source, adding that these terms were unacceptable to San Miguel, which wanted Telstra to share in the risk of the proposed mobile phone service aimed at breaking the Globe-Smart duopoly, whose Internet service has been described as among the slowest in the world.

Despite this, San Miguel president and CEO Ramon Ang vowed to “take the telecom industry to the next level by becoming the disruptive innovator in a duopolistic market.”

“And we will deliver on this promise,” he said. “We will change the game by providing superior telecommunications services, including a fast, reliable and affordable mobile broadband. Currently, Internet connectivity in the Philippines is among the slowest in the world. Consumers deserve a better, more reliable third option.”

Yesterday, San Miguel said it would enter the Philippine telecommunications industry alone “as scheduled” after talks with Telstra collapsed.

Ang said that both SMC and Telstra worked hard to come up with an acceptable resolution to some issues. “However, we agreed we can no longer continue with the talks,” he said. “I believe this is best for all parties.”

The diversified conglomerate said it would still switch on its telecommunications network along with its high-speed Internet service as scheduled despite the development.

Sources said the physical infrastructure for the wireless service was nearing completion with cell sites being almost fully deployed in Metro Manila and in provinces immediately to the north and south of the National Capital Region.

At the same time, Ang said that Telstra offered to continue technical work design and construction consultancy support to SMC.

He added that SMC would “consider other joint-venture opportunities for its telco business” but added that they were not in a hurry to find a new partner.

“We are not rushing,” he said. “What’s important is that we give Filipinos a third and better choice that they have been deprived of for the longest time.”

SMC’s prized assets for its planned telecommunications venture are several licenses for radio frequencies in the 700 MHz spectrum that are crucial for 4G data services.