Tuesday, March 29, 2011

PLDT to buy 51.55% of Digitel

igitel’s parent company, JG Summit Holdings, disclosed yesterday to the PSE that they’re going to give up 51.55% in Digitel to PLDT. The deal will be share-swap and JG Summit Holdings will acquire 12.8% in PLDT shares. Total equity value of the entire transaction a whopping P74.1 Billion. This is definitely one of the most interesting things to happen in the teclo industry. This means that Sun Cellular and PLDT/Smart will be working together since they both have interests with one another and the only one in the opposite corner will be Globe.

In a blockbuster deal that caught the telco industry by surprise, dominant carrier PLDT announced on Tuesday that it is acquiring 51.55 majority ownership of Gokongwei-owned operator Digitel, which owns the Sun Cellular brand, for a total value of P74.1 billion.

The merger is formally announced in a hastily announced press briefing at the Crowne Plaze Hotel in Ortigas by (from left) PLDT president Napoleon Nazareno, PLDT chair Manuel V. Pangilinan, JG Summit chair James Go, and JG Summit president Lance Gokongwei.

Main rival Globe Telecom immediately retorted that it is “ready to compete” against the new twin-headed giant.

“The Digitel and PLDT merger will not fundamentally change our strategy. We stand ready to compete, and to defend and grow our market share. This industry has always been intensely competitive, and we have been a strong challenger to a dominant incumbent all this time,” Ernest L. Cu, Globe President and CEO, said in a statement.

With the merger, the combined market share in the cellular space of PLDT and Digitel will now stand at 67 percent. “The market share for the landline business is slightly higher than that [67 percent],” said PLDT boss Manuel V. Pangilinan in a hurriedly arranged press briefing at the Crowne Plaze Hotel in Pasig City.

Saying the competition is not just confined on local shores, Pangilinan said the merger was needed to better equip PLDT against the changing landscape and onslaught of Internet and broadband companies such as Skype.

JG Summit president and COO Lance Gokongwei, said Digitel went through “a very difficul”t process before arriving at the decision.

James Go, chairman and CEO of JG Summit, said that even if the company has already ceded majority ownership to PLDT, the family-owned corporation will continue to invest in the telco business although its main focus now is on the petro-chemical industry.

PLDT said it will seek the requisite shareholder approval for the issuance of the new company shares as payment for the purchase price of Digitel, and regulatory approvals for the transaction by the National Telecommunications Commission and the Securities and Exchange Commission.

A representative of JGS is expected to join the board of directors of PLDT as a result of the acquisition. The transaction is intended to be completed by June 30, 2011.

Both PLDT and JG Summit earlier asked the local bourse to suspend the trading of their shares, triggering speculations that the two telcos were conducting negotiations.

PLDT said its investment in Digitel “is expected to achieve substantial benefits for the consumers, the general public and the shareholders of PLDT and JGS. It will leverage the combined expertise of the PLDT Group and Digitel to create a more capable telecommunications company which will be better-positioned to provide higher quality and even more affordable services to fixed line, wireless, and broadband subscribers addressing a wide range of consumer demand — from voice to SMS to data and Internet and video services.”

PLDT said “intends to keep the mobile operations of Digitel separate and intact, and to maintain and capitalize on Sun Cellular’s operations and significant brand equity to continue serving specific segments of the market, especially those who prefer ‘unlimited’ type of services.”

Digitel will add approximately 450,000 subscribers to PLDT’s current base of 1.8 million subscribers.

“Though this initiative alters the country’s telecom landscape, we expect competition within the industry to remain very robust given that other operators, including new entrants, are formidable and well-funded. And as I have alluded to in previous statements, we face growing competition not just from other telcos but also from the so-called ‘over the top’ or OTT service providers that offer social networking, instant messaging and VoIP services,” Pangilinan said.

“In making this decision, JG Summit went through a rigorous review of its strategic options and concluded that PLDT is the best partner for all our stakeholders — Digitel subscribers should reap benefits from PLDT’s sizeable infrastructure and leading-edge platforms. The transaction should also bring significant value to JG Summit’s shareholders without relinquishing our participation in the Philippine telecommunications industry,” stated Go of JG Summit.

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