What did Telstra and San Miguel not agree on?

This morning a press release from Australian telecoms company, Telstra, announced that they have ceased negotiations on a joint venture in the Philipines. The bigger question is why? What made Telstra back out of their plans to invest with San Miguel in the country?

We offer two possible reasons.

1. Disagreement between the investment value of the 700MHz spectrum.

San Miguel owns a sizable chunk of the 700MHz band which will be used in the mobile data network that SMC is building. Telstra CEO has stated that they are willing to invest up to $1 billion for the joint venture with San Miguel. The assumption is that the $1 billion will represent the 40% share of Telstra in the joint venture.

San Miguel, or Ramon Ang for that matter, might have inflated the investment value of the 700MHz band to reduce the potential share of Telstra.

Yugatech 728x90 Reno7 Series

According to Steve Mackay, Director and Founder of Creator Tech, the value of the 700MHz band could be in the range of $900 million to $2.7 billion. If San Miguel insists that it should be valued at or near the $2.7 billion mark, then the $1 billion of Telstra will be reduced to just 27%. That’s just accounting the 700MHz band. San Miguel surely has other assets and infrastructure on top of that which could balloon to $3.5 to $4 billion in value, further reducing the investment of Telstra to a mere 20%.

The other scenario is that San Miguel would have asked Telstra to pony up $2.5 billion for the 40% of the joint venture. Telstra might have thought that it is too much and backed out.

2. Threat that the 700MHz spectrum will be re-allocated to other players.

There has been a lot of pressure on the regulatory side to sub-divide and re-allocate the 700MHz spectrum that is currently owned by San Miguel. Both PLDT and Globe have asked the NTC to act on this.

The possibility that the 700MHz spectrum will be divided among San Miguel, PLDT and Globe might have scared away Telstra. When that happens, it will reduce the advantage of San Miguel in terms of network capacity and also reduce the investment value of the remaining chunk of the spectrum.

Ramong Ang might have assured Telstra that it will hold on to the ownership of that spectrum but the uncertainty is still a big risk for the Australian telecoms company.

Between the two scenarios, the more likely reason would be #1.

Avatar for Abe Olandres

Abe is the founder and Editor-in-Chief of YugaTech. You Can follow him on Twitter @abeolandres.

12 Responses

  1. Avatar for Kelvin7132 Kelvin7132 says:

    NIce article….
    I thought it was because of the 50% +1share

  2. Avatar for Yow Yow says:

    My ilalabas ang san miguel. Ung bell telco.

  3. Avatar for ernie kramer ernie kramer says:

    why is this news? this should be in the opinion section.

  4. Avatar for SunCell Subscriber SunCell Subscriber says:



  5. Avatar for Easy E Easy E says:

    The 700MHz spectrum is SanMiguel’s prime resource here. Maraming nagkakandarapa na makuha yan. Syempre itataas ng SanMiguel ang value nyan para syempre sa business interest nya. Mas maganda kasi ang propagation characteristics ng mas mababang frequency kesa sa mataas na >800MHz bands.

  6. Avatar for Tordesillas Tordesillas says:

    daming typo. may nagpoproofread ba nito?

    has sated* that
    that the 41* billion with* represent the 40%
    Accoridng* to Steve Mackay
    should be value* at $2.7 billion
    telstra* will be reduced to
    spectrum will be re-allocate*
    but the uncertainly*

  7. Avatar for OCD OCD says:

    Too much error on this article. Ugh

  8. Avatar for Richard Chua Richard Chua says:

    Need a better proofreader? :D

Leave a Reply

Your email address will not be published. Required fields are marked *