San Miguel Corp to enter telecom business

MANILA, Philippines - San Miguel Corp. (SMC) is planning to enter the highly competitive cellular mobile telephone service (CMTS) industry via its newly acquired Bell Telecommunication Philippines Inc. (BellTel).

SMC president Ramon Ang told The STAR that “we will be happy to be the fourth player in the cellular market in the future.”

SMC just last August subscribed to shares of stock equivalent to 75 percent of three companies that collectively own 100 percent of BellTel.

BellTel was owned by the Puyat-Reyes and Ortigas families through the three companies: Two Cassandra-CCI Conglomerates Inc., Perchpoint Holdings Corp. and Power Smart Capital Ltd., all of which agreed to sell a controlling stake to SMC’s wholly owned subsidiary Vega Telecom Inc.

SMC and its foreign partner, Qatar Telecom (Q-Tel), already own a controlling stake in Liberty Telecommunication Holdings Inc. and is also reportedly finalizing the acquisition of Express Telecommunications Co. (Extelcom), a company controlled by businessman and former trade minister Roberto Ongpin. There are also ongoing talks between Ongpin and the SMC group to acquire the former’s Eastern Telecommunications Phils. Inc. (ETPI).

Observers note that SMC wants BellTel because it had a 10-megahertz GSM (Global System for Mobile Communications) frequency contiguous to that of Extelcom’s. On the other hand, Liberty has broadband wireless access but has no GSM capability.

Under the plan, San Miguel and Q-Tel will create and jointly manage a new holding company for all three telecom interests.

BellTel, which began commercial operations in 2002, offers an integrated package of services, including local and long distance telephony, high speed data connectivity, Internet, cable TV, and videoconferencing. It has various licenses that include local exchange carrier (LEC), international gateway facility (IGF), inter-exchange carrier (IXC), very small aperture terminal (VSAT), and Internet service provider (ISP). It also operates a domestic C-band satellite hub providing connectivity for customers in remote sites not yet covered by its wireless networks. It is authorized to provide the full range of services throughout the Philippines.

The CMTS market in the Philippines is currently composed of three players, namely Smart Communications, which also owns Connectivity Unlimited Resources Enterprise (CURE); Globe Telecom, and the Gokongwei-owned Digital Telecommunications Phils. Inc. (Digitel).

While industry observers believe that the market is already saturated, Ang said he believes there is still room for a fourth player.

Ang earlier told The STAR that SMC wants to position itself as a very strong player in the local telecommunications industry in a bid to further improve telco services in the country and bring down rates to more affordable levels.

At present, SMC has a 32.7 percent stake in Liberty Telecom Holdings via Vega Telecom. It has also signed a memorandum of agreement with Qatar Telecom, which also holds shares in Liberty, to explore areas on wireless broadband and mobile communications projects. He said they have an option to go up to 49 percent.

In the case of Extelcom, the negotiations with Trans Digital Excel Inc. (TDE), the majority shareholder of Extelcom and owned by Ongpin for the acquisition by SMC of TDE’s stake has cleared a major hurdle after the Supreme Court denied a petition filed by Bayan Telecommunications that questioned the dilution of the latter’s stake in Extelcom and the resulting increase in TDE’s shareholdings.

Ang said that they are interested in buying Extelcom because of the frequencies that it owns.

SMC’s acquisition of a stake in Liberty allowed it to go into wireless broadband. Ang also expressed particular interest in voice over the Internet (VoIP) applications, although he admitted that they remain to be very interested in going into mobile cellular telephone services. “If given the opportunity to go into cellular, we will,” he said.

He explained that there is room for a significant fourth player in the telecommunications industry and the CMTS business, as well as for improved telecommunications services and rate.

The SMC top executive head said while the world telecommunications industry is generating an average gross profit of 28 percent, the top two CMTS operators here are making as much as 65 percent. “They are making a killing because there is no real competition,” he stressed.

He added that while regionally, the interconnection rates are low at 20 cents, here, it is as high as P6 per minute.

Ang also noted that even with the presence of a third player in the mobile telephony industry, while this has helped bring down rates and improve services of the two others, there is still no real competition. “As a fourth player, we aim to improve service and rates for the benefit of the Filipino people,” he emphasized.