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PLDT Deal for Digital Approved With Condition to Sell Frequency

The government approved Philippine Long Distance Telephone Co. (TEL)’s purchase of a smaller rival for as much as 74.1 billion pesos ($1.7 billion) with conditions including selling mobile-phone spectrum to ensure competition.

The country’s biggest phone company bought a 52 percent stake in Digital Telecommunications Philippines Inc. for 69.2 billion pesos and will acquire the rest for as much as 4.9 billion pesos, according to terms announced in March. It took the government seven months to approve the deal, which rival Globe Telecom Inc. (GLO) initially said was anti-competitive and would result in PLDT getting 70 percent of the nation’s mobile-phone market.

“This is a good compromise as it moves the transaction forward,” Rico Gomez, who helps manage $1.5 billion at Manila- based Rizal Commercial Banking Corp. (RCB), said by telephone today.

The regulatory approval is a “progressive step” that will promote consumer welfare and equal opportunities in the telecommunications industry, Globe said in a statement. Globe, a venture of Ayala Corp. (AC) and Singapore Telecommunications Ltd. (ST), is the country’s second-biggest provider of mobile-phone services.

The Philippines doesn’t have an antitrust law.

A unit of PLDT will sell a third-generation network frequency in state-supervised bidding, PLDT said in a disclosure today. The National Telecommunications Commission also required the company to keep Digital’s unlimited mobile-phone service.

Margins Squeezed

PLDT bought the majority stake from shareholders including billionaire John Gokongwei’s JG Summit Holdings Inc., triggering a tender offer, according to the statement. PLDT said it will offer remaining Digital shareholders 1.60 pesos a share of 1 PLDT share for every 1,559 Digital shares.

Digital grabbed market share from bigger rivals and squeezed industry margins when it offered plans with unlimited calls and text messages in 2004.

PLDT shares rose for a seventh day and closed 1 percent higher at 2,330 pesos before the announcement. JG Summit Holdings Inc. (JGS), from which PLDT bought Digital, advanced 1.8 percent in Manila trading.

Digital gained 0.7 percent to 1.54 pesos. Globe fell 0.9 percent to 892 pesos.

To contact the reporters on this story: Norman P. Aquino in Manila at naquino1@bloomberg.net; Ian Sayson in Manila at isayson@bloomberg.net

To contact the editor responsible for this story: Clarissa Batino at cbatino@bloomberg.net

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