Postponement of key fundraising seen slowing DITO's telco rollout

MANILA, Philippines — Dito CME Holdings Corp.’s decision to defer a major fundraising activity has potential to hamper the rollout plans of its nascent telco unit, a problem that could threaten its ability to meet state-imposed targets.

Dito unilaterally postponed its planned P8-billion stock rights offer (SRO) that was meant to raise cash for the capital-intensive network expansion of its telco venture, Dito Telecommunity Corp. The company blamed “less than ideal market conditions” for the debacle, but analysts over the weekend said investors just “lack confidence” in Dito.

While the postponed offer might not hurt the telco business’ current operations, Terry Ridon, convenor at Infrawatch PH, an infrastructure think tank, believes the incident “might slow (Dito’s) rollout and expansion to improve connectivity and user experience.”

That could create a big problem for Dito, owned by Davao-based businessman Dennis Uy who is also known for backing the campaign President Rodrigo Duterte, whose influence begins to wane as the end of his 6-year term nears. Come July, Dito would have to pass a third annual technical audit that had set more difficult targets for the company: a 70% population coverage and a minimum average speed of 55 Mbps.

Uy, the company’s chairman, said Dito is nevertheless “confident” that it can pass the test.

For now, DITO President Ernesto Alberto said the company is “studying several alternative financing proposals recently made available to us which we see to be more value-enhancing to our shareholders.” Joseph John Ong, company CFO, said Dito secured commitments on over $4 billion in long-term debt from foreign creditors that, once approved, are “more than enough to finance the roll-out plans of DITO Telecommunity for the last three years of our five-year capital expenditure plans.”

But Ridon is calling for more transparency. “DITO should disclose the extent of the impact to its future plans, to guide regulators and investors dealing with the company,” he said.

On Monday, trading of Dito’s shares was halted by the Philippine Stock Exchange, whose reputation is now at risk of being tarnished following the company’s action, which is expected to hurt small-time investors who, in hopes of gaining from the offer, sold their Dito stocks to fund their purchase of discounted SRO shares.

For Ridon, the PSE and Securities and Exchange Commission “should raise the level of penalties for similar failed transactions to deter similar incidents in the future.”

Already, the impact of the SRO fiasco appeared to have spilled over to other Uy-led companies. On Monday, shares in Phoenix Petroleum Philippines, Uy’s oil company, ended trading down 1.3%. Meanwhile, PH Resort Group Holdings Inc. crashed 7.5% while Chelsea Logistics and Infrastructure Holdings Corp. lost 0.61%.

“Lack of confidence stems from the significant execution risk. Dito is still in early operating stage and not expected to be profitable till 2026 based on the company’s guidance,” April Lee-Tan, head of research at COL Financial, said.

“If Dito is able to grow its subscriber base and generate profits at a faster than expected pace, then that should help raise investor confidence,” Tan added.