Kissing in action
In selling its telecommunications business directly to competitors, San Miguel actually sacrificed some windfall profit never before seen in Philippine business.
From what I gathered, San Miguel got a price for its telco business that was much lower than the market value, at least based on a study done by Credit Suisse.
The study zeroed in on the market value of the principal asset of the San Miguel telco venture: The much talked about 700 MHz bandwidth, which is sought after because it can accommodate the latest technology called LTE.
And so the study put the market value of the San Miguel 700 MHz bandwidth at $2.4 billion to $4 billion—about P110 billion to P185 billion.
News reports noted that the telco duopoly PLDT and Globe Telecom acquired the entire telco business of San Miguel for P70 billion—about $1.5 billion.
Take note that, even in its press statements following the deal, San Miguel said it had sold the telco business “at cost.”
The deal even included the stake of San Miguel in Bell Telecoms, Liberty Telecoms, and Eastern Telecoms, and the buyers PLDT and Globe would assume only the “contractual” obligations of San Miguel in the telco business.
There—at what could be considered a dirt-cheap price, comparatively, PLDT and Globe, in effect, got rid of competition from one of the biggest conglomerates in the country.
The telco sector of course has a long track record of destroying competition through mergers and acquisitions of such names as CURE, Sun Cellular, Prime World, Meridien, Islacom, Bayantel and Altimax.
But news media even kissed the P70-billion mega deal, calling it the practical solution to painfully slow internet speeds in the country.
They said the deal would benefit the 44 million or so internet users in country, supposedly because it would put into use—sooner than later—the 700 MHz bandwidth for high-speed internet.
Well and good! We would think that the business sector would be cheering. Well, the influential PCCI already called the deal anticompetition.
Now, missing in action is the government in all the excitement over the mega deal, except for some pathetic threats issued by the Aquino (Part II) administration and by our incoming President Duterte Harley.
Before he banned the usual press conferences in Davao City, he announced that, as a policy, the new Duterte administration would want the telco industry to shape up, or else he would be forced to open the sector to foreign competition.
Question: Why would the new Duterte administration even have to wait for the telco industry to shape up for it to do something about its poor service?
All along down here in my barangay, the guys thought the existence of healthy competition should be the ideal course in business. We also thought that telco sector already missed its chance to “shape up” in the past 30 years. Really, we have suffered long enough.
It thus seems that our government still wants to protect the local telco sector, as a policy. Look, guys, no competition!
At the same time, the National Telecommunication Commission already gave its tacit approval of the mega deal that, in other countries, could be viewed as outright anti-competition.
In reaction to the deal, the NTC reportedly said it was giving PLDT and Globe just a year —or by June next year—to improve their broadband service.
Or else the NTC would confiscate the 700 MHz bandwidth that they bought from San Miguel, although NTC did not say at what point the NTC acquired the power to confiscate assets of private companies just like that.
Okay—and so the duopoly already bought out San Miguel, the one competitor considered most likely to become aggressive, and they even spent about P70 billion, although they actually got a huge discount.
Any way you look at it, that P70 billion was still a big amount of money they could surely use to upgrade their service for our benefit, for instance.
But, no, they would not, and they would rather borrow more money to pay for the acquisition and then borrow even more to invest in the elusive upgrade.
Like it or not, there is just a single way to look at the supposed “mega deal,” and it is the surest way for both PLDT and Globe to ease out competition.
In a way, they even bamboozled San Miguel to give up its telco business.
That was evident in the experience of the Australian telco giant Telstra in its aborted attempt to invest in the Philippines in partnership with San Miguel.
Telstra of course dropped the plan, and reports from Sydney said Telstra actually saw the horror of having to deal with the judicial system in the Philippines, not to mention the need to fight the stranglehold of the existing telco industry over the regulatory regime here.
In short, it did not bode well for a newcomer like San Miguel and Telstra.
From what I gathered, the board of San Miguel in fact voted for the sale of its telco business, because they feared some long drawn court battles.
For one, PLDT announced it would file numerous cases against San Miguel over the 700 MHz bandwidth, and we all know how the courts in this country could be … well, ahh, persuaded.
In effect, the cases would only delay the telco ventures of San Miguel, tying down some $2.5 billion on some problematic venture that it could instead use for more profitable businesses.
The San Miguel board decision in a way simply considered the interest of the stockholders.
But what would happen to the 44 million internet users in this country? What would be our assurance that the telco sector would deliver on its promise to give us fast and lower priced broadband service?
What if, with competition already gone, they still could not or would not deliver?
Great—it would mean that the critical 700 MHz bandwidth will still be inactive, instead of being used for our benefit.
And so it could only worsen the problem for us, Any other bright idea?
