NTC okays landmark PLDT-Digitel deal

MANILA, Philippines - One of the country’s most celebrated and contested business deals finally survived its biggest hurdle after the National Telecommunications Commission (NTC) gave yesterday its “conditional” approval to the acquisition by telecommunications leader Philippine Long Distance Telephone Co. (PLDT) of an initial 51.55 percent stake worth P69.2 billion in Digital Telecommunications Phils. Inc. (Digitel).

The approval, which was handed down exactly six months after PLDT and Digitel filed their joint application, is subject to certain conditions, including the sale of a PLDT subsidiary in a public bidding. Both PLDT and Digitel have signified their acceptance of the conditions contained in the ruling.

PLDT chairman Manuel V. Pangilinan, in a text message to The STAR, said: “A very good day. Digitel and San Beda championship done. Mission accomplished.”

Pangilinan is financially supporting the San Beda collegiate basketball team which clinched yesterday its back-to-back NCAA championship.

“PLDT is extremely pleased to welcome Digitel to the PLDT Group. PLDT will continue to provide its consumers with the best value in terms of price, quality and range of products and services and we have committed to continue offering ‘unlimited’ type of services in fulfillment of this promise. In addition, Sun Cellular subscribers can benefit from PLDT’s extensive infrastructure and varied service offerings,” he said in a statement.

JG Summit chairman James Go, in a separate statement, pointed out that the transaction ensures that Digitel remains in good hands. “Together, the PLDT-Digitel Group will be well-positioned to compete not only with formidable existing competitors but with well-funded new entrants as well,” he said.

Meanwhile, JG Summit president and CEO Lance Gokongwei, also in a text message to The STAR, said: “We believe that under the ownership of PLDT, we have created a great future for all Digitel and Sun Cellular team members, business partners, and most importantly, customers. We at the JG Summit Group want to continue to provide support and value to the entire PLDT enterprise.”

JG Summit owns the Digitel stake purchased by PLDT. The transaction, which involves the issuance of new PLDT shares, will entitle JG Summit to a board seat in PLDT with an eight percente economic interest.

Globe Telecom, the main oppositor to the PLDT-Digitel deal, through its head of corporate legal services Atty. Froilan Castelo, said the approval of the joint application with condition to divest PLDT’s 10Mhz   3G frequency is a progressive step for the NTC in promoting consumer welfare and fair competition.

He said that given the length of time this deal has been discussed by several authorities in the government, the media, and private sector, the decision of the regulatory body upholds its support to the industry, ensuring equal opportunities among players to compete, and allowing consumers to enjoy quality services from their chosen service provider.

In order to ensure that public interest will not be prejudiced by the sale of Digitel to PLDT, the NTC required PLDT to continue with Digitel’s unlimited call and text messaging services to the public. Digitel is the 100 percent owner of Digitel Mobile Philippines Inc., which owns the Sun Cellular brand.

NTC commissioner Gamaliel Cordoba earlier told The STAR that requiring PLDT to convert Sun Cellular’s “unli” offerings, which are presently only promos and therefore offered for limited periods, into permanent offerings will ensure that public interest will not be prejudiced by the PLDT-Digitel transaction.

Another conditionality imposed is that PLDT will divest itself of subsidiary Connectivity Unlimited Resources Enterprise (CURE), with the latter’s franchise, telecommunications frequencies, and related permits to be later sold through an NTC-supervised competitive public bidding among duly enfranchised and qualified public telecommunication entities (PTEs).

The divestment of CURE, which owns much-sought-after10 Mhz of 3G frequency in the 2100 band, will follow a plan which is detailed in the NTC decision and was the subject of earlier negotiations between the regulator and PLDT.

Under the plan, CURE will sell its Red Mobile business to PLDT wholly-owned mobile subsidiary Smart Communications consisting of its subscriber base, brand and fixed assets. Smart will then sell all of its rights and interests in CURE whose remaining assets will consist of its congressional franchise, the affected frequency, and related permits.

PLDT will have nine months to effect the orderly migration of CURE’s customers as well as an orderly transfer or CURE’s assets to Smart with the least disruption and degradation of service to CURE’s existing customers. The transition period will be reckoned from the date of promulgation of the decision.

The divestment will be made under the supervision and control of the NTC and will be effected through a competitive bidding among PTEs. A minimum price will be prescribed to allow Smart to recover its investment in acquiring, developing and operating CURE.

In case the actual proceeds from the sale exceed the cost recovery amount, PLDT will pay the NTC as fee for supervising the divestment sale, at least 50 percent of such excess less government fees and taxes payable as a consequence of the sale.

The divestment according to the NTC decision, will be conducted within six months after the transition period provided the decision shall have become final and executory. If the implementation of the sale is delayed by reason of any appeal or legal challenge against the decision, CURE will continue to pay spectrum user’s fee and other related fees which will form part of the cost recovery amount.

The NTC added that while the divestment is pending, the PLDT Group will not use the affected frequency.

The third requirement set by the NTC is that PLDT and Digitel shall continue to provide high quality service to their subscribers/users.

PLDT said that following the NTC’s approval, the parties can now proceed to complete the transaction and allow Digitel to have access to the expertise and resources of the PLDT Group so that Digitel can deliver even better, more expensive, and affordable communications services to its customers.

Meanwhile, PLDT announced that at meetings held yesterday by the respective boards of directors of Digitel and Digitel Mobile Philippines Inc. (DMPI), Pangilinan was appointed as chairman while Orlando Vea was appointed as president and chief executive officer.