PLDT-Digitel merger a sign of the future?

08 Apr 2011

Maybe not as grand as the T-Mobile/AT&T proposed merger, the takeover of fixed-mobile operator in the Philippines, Digitel, by The Philippine Long Distance Telephone Company (PLDT), is a sign of things to come.

The acquisition, one of the largest ever in that country, will gain PLDT considerable market share in the Philippines. That probably misses the point that most ‘in the know’ read as the big guy getting rid of the pesky upstart that was constantly biting the heels of its much bigger competitors, PLDT and Globe Telecom, by offering big discounts via ‘creative’ plans.

The deal brings 15 million extra mobile subscribers to PLDT group that currently operates three distinct market category brands – Smart, Talk N’Text and Red Mobile, much like CSL in Hong Kong. That will raise the mobile customer base to 60 million, well ahead of number two, Globe Telecom, with 25 million.

PLDT will buy a 51.5% stake in Digitel Telecommunications for 69.2 billion pesos ($1.6 billion), the payment of which will be done under a mandatory offering of PLDT shares at 2,500 pesos a piece under the name of the parent company, JG Summit Holdings Inc.

PLDT said it will later announce its decision to conduct a tender offer to minority shareholders — holding 48.45% of Digitel stock currently valued at 1.60 pesos per share — in exchange for PLDT shares or cash.

“Our intention is to maintain Sun’s current offers and further improve them. One clear opportunity is mobile broadband,” PLDT President and CEO Napoleon L. Nazareno said in a statement.

However, in this era of rationalization and convergence, one wonders for how long the economics will stand up. It is also the standard line in most takeovers to placate staff nervousness and maintain morale during the ‘absorption’ process as well as appease any anti-competitive concerns the regulators may have.

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