Deal gives PLDT undisputed leadership in telecom market

MANILA, Philippines -  Philippine Long Distance Telephone Co.’s (PLDT) surprise P69.2-billion deal to acquire a majority stake in Digital Telecommunications Co. (Digitel) will further establish itself as the undisputed leader of the local telecommunications market and is seen to mark the beginning of a massive transformation sweeping the highly competitive sector, analysts said.

After a failed bid to acquire PLDT in 2002, food, property and airlines tycoon John Gokongwei has finally scored in his latest attempt to secure a substantial stake in the nation’s largest telecommunications company, which already operates three mobile brands – Smart, Talk & Text and Red Mobile.

JG Summit is expected to own approximately 12.8 percent of PLDT’s enlarged share capital following a share swap deal that will give the telecommunications giant a 51.55-percent stake in Digitel.

PLDT’s purchase of Digitel, which pioneered the intra-network unlimited wireless services in the country that has a taken a toll on the profits of telecommunications companies, will give them a fresh customer base and bring down the choices for cellular subscribers to just two – the PLDT Group and far second place Globe Telecom.

With the acquisition, the PLDT empire which already owns three mobile brands – Smart, Talk N’ Text and Red Mobile – will control about a total of 60 million users. On the other hand, Globe has 25 million subscribers.

Astro Del Castillo, managing head at First Grade Securities, said the deal would usher in a new era of telecommunications that would largely benefit the public.

“Exciting times for the industry. I think this would change the pricing environment. Expect more cuts in prices. Customers will benefit from the cut-throat competition in the industry,” Del Castillo said.

Consumers and companies will increasingly have their pick of new services from telecommunications service providers that are fighting hard to win their business.

“The challenge would be figuring out what the dominant form of communication would be in the future. Nobody can predict where the trending lines are several years from now,” Del Castillo said.

Del Castillo said competition in internet mobile will become even more vital as the telco operators plan to offer enhanced services to reap more revenues.

“The good news is that high-speed mobile broadband service will improve in quality and coverage.”

The transaction, hatched in secrecy, is believed to be the biggest corporate deal in the telecommunications industry.