Users swoon as Telstra makes JV overtures for SMC
It may have been a big year for M&As, partnerships and joint ventures, but perhaps the biggest JV to cause a stir was one that hasn’t actually happened as we went to press: Telstra and Philippines conglomerate San Miguel Corporation (SMC).
Telstra announced in September it was in talks with SMC for a possible JV to offer wireless telecommunications services in the Philippines. SMC first entered the telecoms business in 2009 in the hopes of taking on the duopoly of PLDT and Globe Telecom. However, its attempts to introduce mass-market telecom services have not been successful. Its broadband offering Wi-Tribe, for example, has not taken off, and some of its offices are already closing shop.
But Telstra’s capital and technology coupled with SMC’s telecom assets and local business know-how could be a force to contend with. If the Telstra-SMC joint venture pushes through, Telstra could own up to 40% equity (the foreign ownership threshold permitted by the Philippine Constitution for public utilities).
Moreover, a Telstra-SMC tie-up would be able to get around the problem of infrastructure. Between SMC’s existing assets and Telstra’s ownership of Pacnet (which has an international submarine cable landing in Cavite and Batangas), the combined operator would have its own international submarine cable, landing station, backbone network, and spectrum.
There are still some missing pieces. Eastern’s backbone network is mostly in Luzon, and SMC has yet to massively deploy base stations in the last mile. But a Telstra-SMC JV would be in the coveted position of being able to compete against PLDT and Globe without having to rely heavily on leasing their infrastructure.
Put simply, a Telstra-SMC venture could provide the Philippines telecoms sector (and the internet market in particular) a badly needed shot in the arm via a strong and viable third player. Industry observers say the Philippines telecoms sector has stagnated, with PLDT and Globe controlling the fixed line, mobile phone and broadband markets to the point that they no longer have the incentive to outdo each other or improve customer service, instead falling back on a “follow-the-leader” type of competition.
SMC’s Ramon Ang believes that there’s room for a third telco, and promises to provide “a good network that will at least work.”
The expected JV has brought a sort of hope to Filipinos to address the sorry state of internet in the country.
Pilipinos are hopeful and excited about the competition, regardless of what it could bring. But for consumers who have long felt duped by their service providers, anything but the status quo is probably better.