Duopoly returns

IT TOOK only 10 days for First Pacific’s big boss Manuel V. Pangilinan to clinch the deal that will allow PLDT to take over a majority stake in Gokongwei-led Digitel—nearly a decade after the latter’s hostile takeover attempt at PLDT that MVP successfully fended off. It may have been a defensive blitzkrieg, as PLDT was not Digitel’s only suitor, our sources say.

The transaction will effectively bring back the duopoly in the local telecom industry that is heavily skewed in favor of PLDT, which will now have a 70-percent share of the wireless business versus Globe Telecom’s 30 percent. Before Digitel’s Sun Cellular came into the market, the duopoly was more manageable for Globe at a 60-40 percent share favoring PLDT. Analysts say MVP’s group can use Sun Cellular to engage in a fiercer predatory pricing war against Globe, putting more pressure on the Ayalas to fight tooth and nail for market share.

PLDT still has to convince the market that it was worth paying P74.1 billion for Digitel (Globe’s market cap is around P92 billion) as investors are concerned that the telco giant’s dividends will be henceforth constrained. After all, Digitel’s operating profit margins are a fourth that of PLDT’s and about half of that of Globe’s. Meanwhile, PLDT is using its own stock as currency in this deal, thereby avoiding a cash payment, albeit diluting everyone else in the process.—Doris C. Dumlao

Ecstatic

WHILE most eyes were on the PLDT-Digitel deal Tuesday, several market observers wondered out loud how San Miguel’s Ramon Ang would respond to the latest coup of his “frenemy,” businessman Manny Pangilinan.

Would he just ignore MVP’s latest acquisition? Would RSA make a bid for Globe Telecom in retaliation? Not quite, it seems.

Asked to react on the deal, RSA simply inquired about the transaction price—a mind-blowing amount, by any measure—and replied with the enthusiasm of someone excited for a friend’s good fortune: “I’m very, very happy for [the Gokongweis]. It’s a once-in-a-lifetime opportunity.”—Daxim L. Lucas

SMC debt? What debt?

WHEN it comes to growing San Miguel through acquisitions, company president Ramon Ang never rests. Neither do his enemies and rivals, apparently… to the point of spreading rumors against the group.
If the latest text brigade attacks are to be believed, the conglomerate is now creaking under so much debt that it has broken through all prudential standards (thereby displeasing chairman Danding Cojuangco mightily, so the SMS goes).

Biz Buzz did some sleuthing and number crunching (yes, we have some skills in the latter, too) and learned that the SMC group has P243 billion in interest-bearing debt. Offset that against their P125 billion in cash, and that leaves you with P117 billion in “net debt.”

This yields a debt-to-recurring earnings ratio of only 1.65 times—far lower the limit of 5 times in its agreement with creditors.

According to a market source, SMC’s business rivals want to scare investors away by harping on P208 billion in amortization to the government for its power businesses. These are kept in the books only for accounting purposes and become real liabilities only in proportion to the amount of electricity the power plants sell. Even with these paper liabilities thrown in, the ratio stands at a low two times compared with the group’s capital of P266 million.

So there. Now let’s sit back and wait for more creative attacks against RSA. It will be entertaining.—Daxim L. Lucas

Missed opportunity

MEMBERS of Philippine Airlines’ cabin crew may have missed out on a chance to serve the country’s OFWs. Biz Buzz learned that during the recent repatriation of Libya-based workers, PAL deployed as crew members several line administrators and inflight trainors for their 27-hour rescue flights to and from Greece. The reason: management was concerned that regular cabin crew may suddenly disembark and leave passengers on board should they exceed—even by a fraction of an hour—their union-mandated tours of duty.

In recent months, many passengers were driven up the wall by cancellations caused by cabin crews refusing to serve on flights due to a union campaign for strict collective bargaining agreement compliance. Were they part of the crews’ adherence to the CBA provisions or an attempt to spite management? Hmmm.

The crews’ grievances notwithstanding, some passengers (who feel shortchanged) say cabin crews—like pilots—have an obligation to the riding public. They say pilots’ and crew members’ acts to spite the airline’s management do a great disservice to the passengers who, ultimately, pay for their salaries.—Daxim L. Lucas

MUSX turns green

APART from building up his integrated fruits and vegetables empire through AgriNurture Inc.—which is dually listed on the Philippine and Australian bourses—young entrepreneur Antonio Tiu is entering the renewable energy business using MUSX Corp. as his backdoor.

Tiu is flying out this week to China to enlist investors who will back his bid to acquire assets involving waste recycling as well as biomass, solar and windmill energy. Although this new business will be run separately from ANI, Tiu sees a good fit with the latter given that agricultural byproducts, for instance, could be used to manufacture fertilizers as part of waste recycling.

MUSX, once a semiconductor manufacturing holding firm, will be renamed Greenergy Holdings to reflect the new line of businesses that Tiu will infuse into the listed firm.—Doris C. Dumlao

Donation, not celebration

MITSUBISHI Motors Philippines Corp. has cancelled its turnover party for outgoing president and chief executive Masahiko Ueki and his successor Hikosaburo Shibata. The event, which was scheduled to take place at the Sofitel Philippine Plaza next Monday, was scrapped in light of recent events in Japan.

“The devastating earthquake and tsunami that hit Japan last March 11 have left the whole world in mourning for thousands of lives lost and for billions of properties damaged,” the company said in a statement. “As the nation struggles with rescue efforts, it is also faced with the post-earthquake nuclear catastrophe.”

“As MMPC sincerely sympathizes with the whole nation of Japan, it is announcing the cancellation of the Ueki-Shibata turnover ceremonies. Instead, MMPC will donate the amount budgeted for this event to the victims of the calamity and be a channel toward Japan’s fast recovery,” it added.—Abigail L. Ho

Blue, orange and white returns

WORD from highly placed sources is that a major multinational logistics firm, which left the country a couple of years ago—causing many policymakers to do a lot of handwringing—is about to return to the Philippines.

Since this firm’s highly publicized departure for a more strategic location on the Asian mainland left its former local base of operations almost an empty shell, there is understandably a lot of excitement about “The Return” of this “blue, orange and white” industry giant.

There’s a twist, however, since the firm won’t exactly be returning to its former base. From what we hear, it will set up its regional logistics hub not too far away in a rival base in an adjoining province.

Kudos to the big boss of this new location who has successfully transcended party lines and continues to work for the country’s bigger interests.—Daxim L. Lucas

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