Conglomerate San Miguel Corp. (SMC) gave a detailed explanation for why it never disclosed the value of the coveted radio frequencies held by listed Liberty Telecoms Holdings Inc.
SMC wrote the Securities and Exchange Commission last week to defend actions it took in relation to public disclosures it made while it still owned Liberty.
The company, along with SMC’s entire telecommunications unit Vega Telecom, was sold last May 30 to industry giants PLDT Inc. and Globe Telecom in a deal valued at almost P70 billion.
In its Sept. 8 letter to the SEC that was obtained by the Inquirer, SMC said frequencies were not considered typical “assets”, and a value could not be assigned unless these are used.
“It is only when a telecommunications company manages to construct physical assets … acquire subscribers, and generate cash flow and revenues from subscription fees that frequencies have an indirect bearing on the recognition of the telecommunications network as assets in the books of a telecommunications company,” SMC said.
Liberty, via unit Tori Specturm Telecom Inc., controls a large slice of the 700 megahertz spectrum, which was among the main targets of PLDT and Globe when they decided to acquire Vega last May.
Minority shareholders argued they were not being given their fair share when Vega, now owned by PLDT and Globe, launched a tender offer last month at P2.20 a share.
A report from brokerage house Papa Securities said that figure should be closer to P5 per share when considering Liberty’s spectrum holdings, which also include those in the 2500 MHz band.
SMC acknowledged in its letter that no value was assigned to the 700MHz because it was not being used.
To assign a value would have made the frequency “ripe for recall” by the National Telecommunications Commission, it noted.
Tori’s frequencies in 2015 were reassigned to another Vega subsidiary, Bell Telecommunications.
SMC pursued this structure, which it branded as its “unified rollout plan”, because Tori needed at least $1.1 billion to build an “entirely new” LTE network, SMC said in its letter to the SEC.
Tori then had a P1.6-billion capital deficiency and, thus, was “in no financial position, without additional equity contribution from its shareholders, to roll out an LTE network,” it added.
BellTel would shoulder all the capital and operating expenditures for the network that would use a combined cellular mobile and fixed, nomadic and/or mobile broadband technology, the conglomerate noted.
“The Unified Rollout Plan would have enabled Tori to offer services without the burden of expending massive amounts of money for capital and operating expenditures,” SMC said in its letter.
The plan vanished when SMC eventually sold Vega to PLDT and Globe.