Globe, PLDT acquisition of SMC: Questions answered!

Globe and PLDT announced yesterday that they have reached an agreement to jointly acquire all telco-related assets of San Miguel Corporation.

In separate media briefings, both PLDT and Globe answered questions from the media regarding the joint acquisition. Here are some of the more interesting topics discussed during the briefing.

What exactly did Globe and Smart buy from San Miguel?

Globe and PLDT are buying the entire cluster of companies/subsidiaries of SMC and with it, all the assets and interests that it holds. This includes New Century, eTelco, Vega Telecom, Bow Arken Holdings, Brightshare Holdings. Aside from the huge chunk of the 700MHz frequency, there are also supplementary frequencies in the 900MHz and 1800MHz included in the deal.

Vega Telecom owns Liberty Telecom Holdings, Bell Telecommunication, Eastern Telecom (ETPI), Express Telecom, Cobaltpoint Telecommunication (formerly Extelcom), and Tori Spectrum Telecommunication (formerly Wi-Tribe) and Hi-Frequency Telecommunication.

There are about 400 or so cell sites already deployed across the Philippines that’s included in the deal.

That’s a lot of holdings and subsidiaries.

But, SMC cannot sell the 700MHz band since it’s owned by the government, right?

While this is true, Globe/PLDT did not buy the frequency, per se, but the group of companies that licensed the frequency. With the acquisition, both telco now has operating control of the subsidiaries as well as the frequencies they hold.

Is it true that Globe and PLDT are returning certain frequencies back to government (NTC)?

Yes. A significant amount of 2G, 3G, 4G and (potentially) 5G spectrum will be voluntarily returned to the NTC which can later on be assigned to other interested players. This includes some parts of the 700MHz, 850MHz, 2500MHz and 3500MHz bands.

MVP shared that they had the same issue back then when they bought Sun Cellular — that the 3G spectrum should be returned. So this time, they’re already making the gesture beforehand.

Is the government allowing this sale?

Technically, it’s a done deal. They already have the clearance from the SEC, PSE, NTC and PCC (Philippine Competition Commission).

Under the Competition Law, there isn’t any existing competition since SMC does not have any subscribers yet.

Exactly how much was the deal worth?

The entire portfolio is worth Php69.1 billion but since there are liabilities amounting to Php17.02 billion, the net value is just Php52.08 billion. Globe and PLDT will pay Php26.04 billion each.

Payment is made in cash with 50% outright upon closing of contract and another 25% after 6 month and the remaining 25% on the 12th month.

For Globe’s part, Rizza Maniego-Eala (CFO) states that they are borrowing 98% of the amount from banks and paying the remaining 2% in cash.

As for PLDT, funds will come from partial sale of company’s interest in Meralco held through Beacon Electric. That’s about Php17 billion with the remaining to come from new debts and the company’s balance sheet cash.

How will PLDT and Globe split the assets?

The contract was signed and the sale became effective on 11:01am of May 30, 2016. Both companies still don’t have an exact idea how they will split and operate the subsidiaries.

As for the 700MHz frequency, they will seek guidance from the NTC on who gets which band to use.

How many people are affected?

Eastern Telecoms has about 400 employees and another 400 or so from the other subsidiaries are affected by the sale. The manpower will be eventually audited and critical roles will be retained while others many be let go due to “redundancies”.

What services will be affected (improved) with the use of the 700MHz frequency?

Globe LTE and Smart LTE services will primarily be the beneficiary of the additional frequency. This means more bandwidth available allowing for faster connections.

The 700MHz frequency has wider coverage and the signal can pass thru structures efficiently (better in-door signal in buildings). Wider coverage also means there’s less need for additional cell towers especially in areas that used to have low signal coverage.

However, there are currently a limited number of handsets/devices that support the 700MHz (Snapdragon 810, 820 are supported while Mediatek Helio and Atom-powered devices do not support the frequency) so the effect will not be immediately felt by all subscribers at the same time.

How soon can subscribers feel the improvements?

MVP promises that in 6 months, there will be noticeable improvements in the network. For Globe’s part, Ernest Cu promises the same in 3 to 4 months time.