PLDT purchase of Digitel on hold
Industry leader Philippine Long Distance Telephone Co. (PLDT) has postponed the closing date for its takeover of Digital Telecommunications Philippines Inc. (Digitel) due to legal snags preventing the transaction’s completion.
In a statement on Thursday, PLDT said that several legal hurdles still stand in the way of its acquisition of Digitel, which would result in a player with a market share of 70 percent.
As a result, the deadline for closing has been moved to July 30, from the original deadline of end-June.
In a separate statement, Gokongwei-led JG Summit Holdings said it stayed committed to the deal, which would divest the group from the country’s lucrative telecommunications industry.
“The parties remain committed to this deal since it stands to bring substantial benefits not only to the shareholders but also to the consumers and the general public who will all benefit from the combined expertise of the PLDT group and Digitel,” PLDT chair Manuel V. Pangilinan said.
The setback came amid a recent Supreme Court decision that ordered a probe into the ownership structure of PLDT. The company has been accused of violating a 40-percent foreign ownership restriction for public utility companies in the Constitution.
The majority of PLDT’s voting shares are held by Hong Kong’s First Pacific Co. Ltd. and Japan’s NTT DoCoMo. However, the company has also issued preferred shares. These instruments represent ownership of the company, but do not have voting rights.
Only over a tenth of PLDT’s combined common and preferred shares are held by foreigners. “We affirm that PLDT’s foreign ownership is well below the limit of 40 percent,” Pangilinan said.
The P74.1-billion deal between PLDT and Digitel was announced last May following months of negotiations between the two groups.
PLDT seeks to solidify its position as the market leader while the Gokongwei group said it wanted to raise funds for investments in other industries.
Digitel’s Sun Cellular brand is the third-largest in the country’s telecommunications sector.
However, the two firms still need to secure approval from the National Telecommunications Commission (NTC) before the deal can be finalized.
PLDT also needs the approval of the Securities and Exchange Commission for the approval of new common shares, which will be used to pay JG Summit.
“We are confident that soon, the consumers of Sun will reap the benefits of a stronger and a more robust telecommunications company resulting from the PLDT-Digitel deal,” JG Summit chair James L. Go said.
Globe Telecom, owned by conglomerate Ayala Corp. in cooperation with Singapore Telecom, has opposed the merger of its two rivals, saying it would create a single entity with the power to dictate pricing to the detriment of consumers.
