PLDT-DIGITEL MARRIAGE The National Telecommunications Commission finally gave the go-signal to PLDT’s acquisition Digitel but with a steep set of requirements that negated some of the gains of the deal.
Telecommunications regulators on Wednesday gave the green light to the Philippine Long Distance Telephone Co.’s acquisition of Digital Telecommunications Philippines Inc. (Digitel) but preconditioned its approval on a steep set of requirements that negated some of the gains of the deal.
The National Telecommunications Commission has ordered PLDT to divest itself of 10 Megahertz of so-called Third Generation radio frequencies, a move that is seen to level the playing field with Ayala-controlled rival Globe Telecom Inc.
The NTC also ordered PLDT to retain the unlimited call and SMS plans currently offered by Gokongwei-owned Digitel through its Sun Cellular brand and even expand these service offerings nationwide.
The regulator’s policy pronouncement capped seven months of heavy lobbying by rival telecommunications firms after the March 2011 announcement of the PLDT-Digitel merger.
No less than President Aquino had earlier said that he preferred to prevent the return of a monopoly in the telecommunications industry by leveling the playing field between competitors—a statement interpreted by market players as having been favorable to the Ayala group’s appeal.
“The NTC has initiated steps to prevent abuse of market power arising from substantial market dominance by imposing certain conditions on the transaction that would protect the interest of the consumers,” NTC Commissioner Gamaliel Cordoba said in a press briefing.
The regulator’s move was lauded by Globe Telecom while PLDT said that it accepted the conditions set by the NTC.
The NTC ordered PLDT to wind down its operations in its Connectivity Unlimited Resources Enterprise (CURE) unit by stripping the subsidiary of all its assets, except its congressional franchise and its 10MHz 3G license, which PLDT bought for P419 million in 2008.
PLDT was given nine months to execute this operation—including the “orderly transfer” of customers currently being serviced through this frequency—and was prohibited from using this radio band in the meantime.
Cordoba said that once PLDT surrenders this license and the congressional franchise back to the NTC, it would be bid out to prospective buyers in a competitive auction. PLDT will be barred from participating in the auction.
PLDT would then be compensated monetarily for the frequency removed from it—at a value based on the costs they incurred to acquire it—while any amount gained from the bid sale would be split evenly between the telecommunications giant and NTC.
With the approval, PLDT and Gokongwei-controlled JG Summit Holdings Inc. on Wednesday announced the former’s successful acquisition of a majority interest in Digitel from the latter in a share-swap transaction valued at about P69.2 billion.
“Together with 3.277 billion shares representing 51.55 percent of Digitel’s outstanding common stock, PLDT also acquired the zero-coupon bonds issued by Digitel Group to JG Summit, which were assumed to be convertible or exchangeable into 18.6 billion Digitel shares, and assumed P34.1 billion in advances made by JG Summit to Digitel Group,” both firms said in a joint statement.
As payment for these assets, PLDT issued 27.68 million new shares of common stock at the issue price of P2,500 each. As a result, the JG Summit Group currently holds approximately 12.9 percent of PLDT’s expanded outstanding common stock.