MANILA, Philippines — Integrated telco PLDT Inc. has generated P77 billion in a landmark sale and leaseback deal with two international telecom tower operators.
PLDT subsidiaries Smart Communications Inc. and Digitel Mobile Philippines Inc. have signed sale and purchase agreements with subsidiaries of edotco Group and EdgePoint for the sale of 5,907 telecom towers and related passive telecom infrastructure.
The assets that were sold comprised almost half of PLDT’s tower portfolio.
PLDT said the transaction price of P77 billion makes the deal the largest ever acquisition of assets in the Philippines by international investors, with the towers sold at a significant premium over book value.
Of the 5,907 towers, 2,973 towers located primarily in Luzon, Visayas and Mindanao will be acquired by edotco subsidiary ISOC edotco Towers Inc. and 2,934 towers located in Luzon will go to Comworks Infratech Corp., a subsidiary of EdgePoint.
PLDT said the winning bidders, which were selected following a stringent process, are backed by international groups with extensive experience in the telecom tower space.
edotco manages over 54,000 towers across nine countries in Asia, while EdgePoint owns approximately 10,000 towers across Indonesia and Malaysia.
PLDT said both groups would bring global best practices and technologies in operating the towers, which should translate into better network quality, higher resilience, and faster recovery from typhoons and other natural calamities.
The sale of the towers supports the Department of Information and Communications Technology (DICT)’s goal to improve tower density, which will lead to significant efficiencies and improved connectivity.
“Our TowerCo partners, selected after a thorough process, will provide the group with the infusion of global best practices and innovative solutions. PLDT is now even better positioned to continue our journey towards service excellence and best-in-class customer experience, making us the telco of choice in the Philippines,” PLDT and Smart president Alfredo Panlilio said.
PLDT’s tower sale is expected to provide valuation uplift, significant operational efficiencies, and enable reallocation of capital for the company.
In addition to resulting in a significant gain on disposal for the company, the arrangement is also seen to be earnings accretive from the first full year post closing.
“This partnership with experienced international tower companies represents another milestone in PLDT’s strategic transformation. We expect to reap benefits in terms of a valuation uplift and capital reallocation, with PLDT applying the proceeds to deleverage, further invest in the network, and return cash to shareholders via a special dividend,” PLDT chairman Manuel V. Pangilinan said.
Proceeds of the sale will be used primarily by PLDT for debt prepayment, fund major cash requirements this year, as well as special dividends of up to P9 billion.
“We proposed to prepay around P27.5 billion of our debts maturing this year and next year. We do not need to borrow P24.5 billion that will be used for capex and other service requirements originally based on our plans with the proceeds we generate from this transaction,” PLDT chief finance officer Anabelle Chua said.
Concurrent with the execution of the sale and purchase agreements, Smart has also entered into master services agreements with the tower companies whereby Smart has agreed to lease back the towers sold in the transaction for a period of 10 years.
Smart has secured competitive terms as the anchor tenant on the towers and expects to benefit from operational and capital expenditure savings.
The sale and leaseback will be complemented by a new tower build commitment of 1,500 towers in total over the next few years, which is expected to further solidify Smart’s network quality and enhance customer experience in the country.
PLDT said closing of the transaction would be staggered based on number of towers being transferred, with the first closing expected by next month, and the last closing by the fourth quarter.
The transactions were welcomed by both the DICT and the National Telecommunications Commission (NTC).
“These tower companies are backed by international groups with extensive experience in the telecom tower space in the region and their entry in the Philippine market significantly jumpstarts our common tower industry. This transaction is a triumph of the DICT’s policy promoting the sharing of telecom infrastructure through the establishment and use of common towers by the telecoms companies and internet service providers,” DICT Secretary Emmanuel Rey Caintic said.
“The edotco Group and the EdgePoint Group will bring global best practices and technologies in operating telco tower infrastructure nationwide and is a much-awaited development for NTC since it would translate into better connectivity for telco subscribers and ensure higher resilience and faster recovery from typhoons and other calamities,” NTC Commissioner Gamaliel Cordoba said.