- San Miguel, Telstra failed to agree on investment terms
- Rivals gain on bet San Miguel less competitive without Telstra
Philippine Long Distance Telephone Co. and Globe Telecom Inc. rallied in Manila trading after San Miguel Corp. and Telstra Corp. ended talks on joint investment in a new mobile network in the Philippines.
PLDT and Globe, the Philippines’ two established phone companies, gained on expectations the collapse of Telstra and San Miguel’s planned joint venture will weaken the latter’s ability to compete for wireless users.
“The discontinuation of talks between Telstra and San Miguel will delay the entry of a formidable third telco into the Philippines’ market,” Fitch Ratings Inc. said in statement. This will support the credit strength of Philippine Telephone and Globe in the short term, Fitch said.
San Miguel, the Philippine’s largest company, remains on schedule to begin providing wireless phone and high-speed Internet services with Telstra offering support, San Miguel President Ramon Ang said in a statement Monday. The beer, energy and infrastructure firm built a phone network with Telstra’s help to challenge PLDT, the former telephone monopoly, and Globe, the nation’s only other wireless carrier.
PLDT surged 12 percent, the most since 2011, at the close in Manila trading. Globe rallied 7.9 percent, the sharpest gain since June 2013.
San Miguel and Telstra had worked hard on the deal before agreeing they could not continue talks, Ang said. Telstra Chief Executive Officer Andy Penn said the two companies lacked “commercial arrangements that would have enabled us all to proceed.”
San Miguel’s venture Liberty Telecoms Holdings Inc. plunged 16 percent on volume that rose more than six times the three month full-day average. Telstra shares gained 2.3 percent.
Ang said San Miguel will consider other joint venture opportunities for its telecommunications business, but is “not rushing.”
PLDT and Globe have raised capital spending to boost their digital network capacity before San Miguel’s entry. They have also asked the government to reallocate the 700 megahertz spectrum, which has been largely assigned to companies related to San Miguel. Ang in November said PLDT and Globe have more than enough frequencies between them and all they need is to improve what they have.
“Without Telstra, the perception in the market is that San Miguel’s telco venture will not be as great, since Telstra has the technical expertise,” said Rafael Palma Gil, Manila-based trader at Rizal Commercial Banking Corp, which has $1.72 billion in assets under management. “The announcement is definitely feeding the positive sentiment on PLDT and Globe. These stocks have underperformed in the past few months because of cloud over the industry by the threat of a third player entering the market.”