Globe revives offer to acquire BayanTel

Ayala-owned Globe Telecom has revived its offer to acquire Lopez-owned Bayan Telecommunications (BayanTel) in order to beef up the business of Globe landline subsidiary Innove Communications.

Highly placed Globe sources told The STAR that pricing remains an issue, though. Concerns have also been raised about the huge debt burden of the Lopez telecommunications firm.

BayanTel parent Benpres Holdings had earlier identified the wireline company of the Lopez Group as among the non-core interests which are up for sale. Benpres officials have confirmed that there are indeed ongoing talks between Globe and BayanTel, as well as a previous offer from Philippine Long Distance Telephone Co. (PLDT) to acquire BayanTel.

BayanTel operates a fixed-line and data business in Metro Manila and select provincial areas. It has close to 300,000 fixed-line customers.

The Globe official said acquiring BayanTel would allow the former to aggressively expand its landline network without investing very much.

As of end-2005, Innove had 362,143 wireline voice subscribers, 12 percent higher than the 323,094 subscribers registered in 2004. Around 62 percent of total subscribers were postpaid while 38 percent were prepaid while business/residential mix was 18:82.

While Innove has been issued by the National Telecommunications Commission (NTC) authority to offer landline services nationwide, laying out the network would involve staggering amounts. Acquiring BayanTel would prove to be a lot cheaper than actually installing new lines and would allow Globe to penetrate areas, especially in Metro Manila which are currently dominated by PLDT and BayanTel, a Globe official said.

The official also revealed that Globe could benefit from BayanTel’s control of the National Digital Transmission Network (NDTN), a telecom backbone that is 92-percent controlled by the Lopez firm.

BayanTel is currently under debt restructuring and still has huge unpaid obligations, but the Globe official emphasized that there are ways of treating BayanTel’s debt in order to benefit Globe. One of this is through the net operating loss carryover (NOLCO).

Earlier, PLDT, the biggest landline operator in the country, offered to buy BayanTel from the Lopez family through a swap deal involving PLDT’s remaining stake in Central CATV, the company which now owns Sky Cable and Home Cable.

The Lopez group, however, rejected the offer. PLDT’s offer was to swap its one-third ownership in Central CATV in exchange for BayanTel. PLDT’s ownership in Central CATV will soon be diluted to around seven to eight percent due to the conversion of an ABS-CBN Broadcasting loan into equity that will increase the Lopez Group’s stake in the cable TV holding company from 66.67 percent to more than 90 percent.

Globe Telecom president Gerardo Ablaza declined to comment on the reported offer of Globe to acquire BayanTel, but neither did he deny it.

A ranking official of the Lopez group said they are open to selling BayanTel for the right price.

Globe’s wireline business in 2005 recorded a double-digit growth of 14 percent in total wireline net operating revenues, attributable largely to growth experienced in both voice and data segments. The voice segment grew by 11 percent year-on-year to register P4.4 billion in net service revenues while the data segment posted a 16 percent growth to reach P2 billion as of the end of last year.

Traffic volume also increased by 36 percent year-on-year to 777 million minutes in 2005 from 571 million minutes in 2004 due to increased subscriber base and the success of promotions launched to increase both domestic and international usage.

On the wireline data front, total operating revenues grew by 21 percent to P2.1 billion from P1.7 billion in 2004, driven mostly by domestic lease lines, international private lease lines, and corporate internet services in terms of better bandwidth and circuit indicators.

BayanTel registered revenues of P2.9 billion in the first half of 2005, up nine percent from P2.66 billion in 2004. The increase was attributed to the strong sales performance of the company’s data and Internet services.

BayanTel chief consultant Tunde Fafunwa said the first semester performance was within the full-year revenue target of P6 billion. In 2004, the company’s revenue reached P5.46 billion.

Fafunwa, however, admitted that it would take at least five more years before the company could swing back to profitability. BayanTel had been in the red over the past several years.

The company is seeing continued growth in its earnings before income tax, depreciation and amortization. EBITDA rose 19 percent to P1.3 billion from P1.09 billion.

BayanTel’s second quarter performance was stronger compared to the first quarter, when revenue was at P1.4 billion. "Our operating income line is already positive. We see ourselves becoming profitable in five years or a bit longer than that," Fafunwa said.