Fitch: SMC acquisition good for PLDT, Globe
The Philippine Long Distance Telephone Co. and Globe Telecom are poised to reap large benefits following a mega deal sealed Monday to acquire the telecommunications unit of conglomerate San Miguel Corp. for over P69 billion.Debt watcher Fitch Ratings said both companies might see a temporary increase in leverage but in exchange for better industry prospects, and the removal of the threat of a third challenger.
“We believe that the incumbents’ business profiles will strengthen with the acquisition, which removes the challenge from SMC to the duopoly market structure,” Fitch Ratings said in a report on Monday.
“In addition, the acquisition will provide PLDT and Globe with access to efficient 700MHz spectrum to expand data services in what is still predominantly a 2G mobile market,” Fitch said.
It said Globe Telecom could reap more benefits as it has established greater exposure to the mobile sector, which has been accounting for 76 percent of its revenue. By comparison, PLDT’s wireless business contributes 63 percent of its revenue.
Both PLDT and Globe will invest aggressively to expand their data services, upon gaining access to the coveted 700MHz spectrum, which is able to penetrate walls and is useful to provide in-building coverage, according to Fitch.
“The Philippine mobile market is highly saturated, but most users are on 2G networks – which provide telcos with plenty opportunities if they offer faster 4G LTE services,” Fitch said.
“SMC’s exit reflects the significant investment required to roll out network infrastructure to compete with the incumbents, especially given that PLDT and Globe would be reluctant to share their tower and associated infrastructure with the new entrant,” it added. SFM
