Bobby Ongpin group buys into Extelcom

Publicly listed company ISM Communications, identified with former trade minister Roberto Ongpin, has reportedly bought shares in Express Telecommunications (Extelcom) as part of its bid to enter the highly competitive cellular mobile telephone system (CMTS) business in the country currently dominated by Smart Communications and Globe Telecom.

Highly placed sources told The STAR that while the shares bought in Extelcom are very small in terms of percentage of total outstanding stock (less than 10 percent), the shares were acquired from a party which could deliver the so-called ‘swing vote’ in the board.

Currently, the biggest voice in Extelcom is Lopez-owned Bayan Telecommunications (BayanTel) which owns about 47 percent of Extelcom but the former has written the shares off.

Current holders of CMTS license include Smart, Globe, Gokongwei-owned Digitel Mobile, Extelcom, and BayanTel. However, BayanTel has yet to utilize its authority and has currently focused on its landline and data business.

The sources disclosed that Extelcom’s authority to engage in mobile services is particularly valuable to ISM which wants to offer a complete range of telecommunications services. Extelcom currently holds certain radio frequencies which will allow ISM to go into cellular without spending huge amounts as was spent by Smart, Globe, and Digitel.

"Extelcom’s frequencies will allow ISM to cover the entire nation at less the usual cost, less the number of cellsites," the source explained.

In addition to Extelcom, ISM has just acquired the 17.7-percent stake of Aerocom in Eastern Telecommunications Phils. (ETPI) via a share swap deal. Sources said that ISM is interested in ETPI’s international gateway facility (IGF) license.

The Australian group which holds a 40-percent stake in ETPI asked the court to issued a restraining order to prevent the issuance of the shares in the latter, alleging that the sale was made in violation of the provisions of ETPI‚s articles of incorporation providing for the right of preemption or first refusal of existing shareholders, but the court denied the petition.

Industry sources that while the 17.7 percent stake of Aerocom in ETPI is relatively small, it can deliver the Œswing votes‚ as in the case of the Extelcom acquisition, which is important in the approval by the board of major decisions.

Sources disclosed that ISM is also prepared to make an offer to the other shareholders of ETPI and Extelcom to increase its stake to majority but this might have to come much later.

At present, ISM has reportedly partnered with a group that has already filed an application with the National Telecommunications Commission (NTC) for authority to offer 3G or third-generation of mobile communications technology, the next stage in cellular technology after GSM or 2G and GPRS or 2.5G currently being used by players like Smart, Globe, and Gokongwei-owned Sun Cellular.

However, existing mobile players want the NTC to give them first crack at the 3G licenses, citing the prior operator rule.

Extelcom is among the first companies to be issued CMTS licenses, but unlike Smart and Globe, it has failed to migrate from the legacy "analog" technology to "digital." The NTC in its 2004 report revealed that Extelcom has 13,670 mobile subscribers in 2004 compared to 29,896 in the previous year compared to Smart and Piltel combined which have already breached the 20-million subscriber mark.

Bayantel has likewise expressed intentions of finally utilizing its CMTS license by offering a non-traditional mobile service.