In this wireless world, Globe Telecom is taking a great leap of faith with its recent announcement that it plans to invest in fixed line provider, Bayan Telecommunications Inc.’s (Bayan). The Ayala-led telco is seeking to buy almost 100 percent of Bayan’s outstanding debts worth $200 million for $184 million in cash. If the deal is consummated, Globe would become one of Bayan’s major creditors. Whether this takeover will happen or not, the country should know before December 18, the deadline for the offer.
In separate talks, Globe is also negotiating to purchase an equity stake in the same telco. Some analysts say this move is definitely an indication that Globe, the second largest telco in the Philippines, is feeling the heat of intense competition in the mobile market.
So, why invest in the struggling Lopez-owned telco? Apart from Bayan’s 200,000 or so landlines, it has 140,000 broadband subscribers and unused frequency. Ah, the magic word: frequency. It is such a precious, finite resource that is causing a lot of madness in the telecoms world, especially in this broadband and smartphone era.
Like a prelude to the acquisition, the National Telecommunications Commission in early October approved the joint use of Globe and Bayan of the 10 MHz of frequencies in the 1800-MHz band assigned to the latter for the provision of CMTS services.
As routine goes, the competition, PLDT/Smart, opposed the joint use and called it “illegal.” The dominant telco, which currently has a 70% share of the mobile phone market, asked the regulator to recall the unused mobile frequencies and to subject them to a bidding process.
Now, this is all reminiscent of a frequency row in 2005 that turned into a protracted court battle after the NTC awarded four of five 3G frequencies to Smart, Globe, Sun Cellular, and new entrant Connectivity Unlimited Resource Enterprise (Cure).
Bayan and other telcos (Multi-Media Telephony Inc. or MTI, AZ Communication Network, Pacific Wireless, and Next Mobile Inc.) —who all applied but failed to snatch the fifth 3G license—contested the results. They questioned the regulator’s evaluation and awarding process, saying that the NTC’s imposition of a new threshold requirement was against known rules. Appeals upon appeals after, the courts upheld NTC’s decision with finality only last year. That is six years of negotiations and spending money on the best lawyers.
Smart/PLDT, who got the biggest 3G pie, eventually acquired CURE along with its 10MHz 3G frequency. Recently, however, it had to surrender this 3G license as a condition made by NTC to approve the telco’s acquisition of Digitel, also a 10 MHz 3G license holder. But the veteran telco is not giving it up that easily. With a 2.12 billion peso price tag, there are doubts as to whether there are any likely takers? Globe? San Miguel? Anyone?
As for Bayan, it is said to be no longer interested in bidding for the 3G license previously held by CURE. In the past, it was brave (or foolish) enough to take on PLDT in the fixed line business. Today, after many years of barely surviving in the cut-throat telecoms market—painful and costly court battles included—it has learned its lesson and is shifting gears. An official revealed that Bayan will instead be riding on Globe’s sites and co-using its 1800-MHz facility. There is sobriety in Bayan’s tone. It knows it has a better fighting chance with Globe by its side.