Monday, May 30, 2016

SMC Sells Telecom Assets to Globe and PLDT

Wazzup Pilipinas!

San Miguel Corporation (SMC) is selling its telco assets (including the 700 MHz spectrum) to both Globe and PLDT/Smart for $1B as it finally bids farewell to being a third telco player in the highly competitive telecommunications industry.

SMC owns almost all of the 700 MHz spectrum (694 MHz to 790 MHz), previously assigned for analog television broadcasting before it was shifted for telecommunications use as TV migrated to digital. SMC would have used this to carpet the country with a “better and cheaper” mobile Internet service.

Negotiations between buyers Globe and PLDT and the seller SMC began shortly after the latter’s foreign telecommunications partner Telstra Corp. Ltd. of Australia backed out of a proposed partnership amid fierce opposition from local rivals as well as skeptics in Australia. Without a foreign partner, SMC would be hard pressed to raise the debt component of the estimated $2-billion investment necessary for a startup telecommunications venture. This was due to the fact that banks that were part of the lending syndicate required the conglomerate to have a foreign technical partner as a precondition for the loan.

SMC’s telco investments were made years ago and are mainly held under unlisted Vega Telecom Inc., its annual report showed. Vega is the holding company for publicly traded Liberty Telecoms Holdings Inc., which holds most of the 700MHz along with High Frequency Telecommunications Inc., as well as Bell Telecommunication Philippines Inc. and Eastern Telecommunications Philippines Inc.

With the impending transaction, PLDT and Globe, respectively backed by Japan’s NTT DoCoMo and Singapore Telecommunications, now have the necessary assets to improve and lower the cost of Internet in the Philippines and will no longer have an excuse for their poor service, which has been subject of congressional inquiries.

The factors that led to this event, however, underscored how difficult it was for new players to enter the country’s telco sector. The Fitch Group’s BMI Research said in a report last month that weak regulation in the country was a powerful disincentive for big foreign player seeking to compete here. Specifically, BMI said both PLDT and Globe “used their market dominance and the ineffective regulatory regime to comprehensively block all avenues for the proposed joint venture (between SMC and Telstra of Australia), highlighting the risk of doing business in the Philippines’ telecoms market.”

I am so disappointed because change isn't coming at all. The PLDT-Globe duopoly has been around for so long already. We needed Telstra and otehr telcos like Telenor, Vimpelcom, and Axiata to come in the Philippines to set things right for all of us. I am just hoping that the newly minted Department of ICT or DICT will keep these two in check. In the absence of competition, government regulation would be the only solution to keep them playing fair towards the subscribers.

We just do not know what will happen. Will there be more monopolistic power or will they improve? The way I see it is that it is going to be more of a struggle, cashing into us little-by-little until the promised speeds that we should have years ago is still not upon us.

We would like to shout out to the new administration to stop this duopoly as the more players in the telco industry would mean better services and rates for the customers. It is about time we end the greed of these two telco giants and let others enter the playing field.


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