Globe clears entry of German partner

Stockholders of Globe Telecom approved yesterday major changes in the capital structure of the telephone company, paving the way for the entry of German telecom giant DeTeAsia Holding as a new partner of Ayala Corp. and Singapore Telecom International Pte. Ltd. (STI).

Gil Genio, Globe chief financial officer, said that under the new holding company called Asiacom Philippines Inc., 60 percent will be owned by Ayala Corp.; 20 percent by STI and 20 percent by DeTeAsia which is a wholly-owned subsidiary of Deutsche Telekom AG (DT).

The new set-up will see Asiacom owning Globe while the latter makes Isla Communications Co. (Islacom) its 100 percent-owned subsidiary.

Ayala Corp. acquired a year ago an indirect controlling interest in Islacom where DT is one of two foreign investors, the other being Shinawatra Computer and Communications Plc of Thailand.

As a result of the transaction, Genio said there is now a need to restructure Globe's current capital structure.

Thus, from a total of 3.33 billion common A and B shares worth P13.75 each, the number will be reduced to 77.4 million outstanding common shares in a unified class at P687.50 per share, which Globe expects to be gobbled up by foreign investors who were discouraged in the past from buying the shares since they were all held by Ayala Corp. and STI.

Globe will then increase its authorized capital stock from P5 billion to P11.25 billion.

Genio said Globe will then issue 158.5 million new preferred shares to Asiacom and 28.8 million new common shares to DT.

The company will also offer the public the opportunity to purchase an additional 31.5 million new preferred shares representing about 30 percent of the shares from the current figure of 16.6 percent.

Genio admitted, however, that Islacom is still several years behind Globe in the development as a telecom company, thus, it incurred a net loss of P2.5 billion in 1999.

Gerardo Ablaza Jr., Globe president and chief executive officer, pointed out that Islacom simply did not have the opportunity to market is products and services aggressively and build up its network at the time when the Asian financial crisis hit.

"Most of the companies had difficulties in funding the capital expenditure. Globe, with it committed shareholders, actually injected all of their cumulative equity at that time. Not every company was able to do that. Therefore at this point, Islacom is somehow at a catch up mode," he explained.

Jaime Augusto Zobel de Ayala, Globe chairman, also stressed that there is no longer a need to look at Islacom's history since Globe itself has gone through the process.

"What we see in Islacom is a massive expenditure program that could be translated into a revenue generating model. What is relevant now is what Globe and Islacom could do together," he said.

Genio added that it takes time for telephone company like Islacom to increase subscribers to generate significant revenues aside from the very large depreciation and interest expense.