MANILA, Philippines - Ayala-owned Globe Telecom may end up owning as much as 70 percent of Lopez-controlled Bayan Telecommunications, industry sources said.
As planned, Globe will acquire $180 million worth of debt papers, held by Bayan’s IOU holders, which can later be converted into equity.
Globe will finance the payment by a combination of cash and shares of stocks.
Bayan sources told The STAR while the company is on the path to recovery, registering positive earnings before interests, taxes, depreciation and amortization (EBITDA), its huge debt burden is constraining it from getting additional funds it needs for expansion.
Globe has said that by securing Bayan’s frequency on the 1,800-megahertz band, it can provide better quality services on text messaging, voice and mobile data services.
The band will also enable Globe to provide long-term evolution (LTE) service that will allow for much faster transmission of data.
Globe finance officer Albert de Larrazabal also explained that the partnership with Bayan will allow the two companies to remain competitive in the saturated telecommunications market.
Earlier this month, Globe has obtained internal approval to start tender offers for the purchase of up to 100 percent of Bayan’s outstanding debts as well as those of unit Radio Communications of the Philippine Inc. (RCPI) from creditors, which include Development Bank of the Philippines, United Coconut Planters Bank and Land Bank of the Philippines.
Bayan in the late 1990s rolled out its network funded mainly by debts when the peso-dollar exchange rate was still around 20-$1. Repaying the loans at the current exchange rate became too expensive so that in 2001, the company was forced to enter into a rehabilitation program.
For the longest time, the Lopezes held on to Bayan because of its synergies with other businesses like ABS-CBN. But with another unit SkyCable now offering cable Internet, the need for Bayan’s data services has become less.
The acquisition of Bayan will also allow Globe to expand its landline business, with Bayan having around 190,000 subscribers. Bayan’s broadband subscriber base stands at around 140,000 and is expected to double this year.
Bayan also owns a huge majority in the National Digital Transmission Network (NDTN).
The local telco industry has been in a state of consolidation, with Philippine Long Distance Telephone Co. (PLDT) acquiring Digitel from the Gokongweis, and San Miguel Corp. (SMC) purchasing Liberty Telecom, Eastern Telecom and Bell Telecom.