Globe and PLDT buy up Philippines rival for spectrum

The Philippines’ two telecoms operators, Globe and PLDT, are to divide up the assets of what nearly became a third rival in the market.

Vega Telecom, owned by food and drinks company San Miguel, will be split 50-50 by the two companies in a takeover deal worth $1.5 billion. The move comes two and a half months after Telstra ended talks with San Miguel over a possible joint telecoms venture.

Globe and PLDT will jointly manage the acquisition, but will also take over most of the company’s 700MHz spectrum. The government will take back some of Vega’s spectrum, opening up the possibility that there will be a third rival later on.

Globe CEO Ernest Cu said: “We entered into this transaction as a solution to harmonize the spectrum assets in the country and immediately unlock the benefits of the underutilised frequencies. Ultimately, our goal is to provide our customers with a better experience on our mobile data and home broadband services progressively over the next 12 months.”

The operators believe that the 700MHz spectrum will give them better coverage from their existing cell sites. Globe said in a statement that they “are having difficulty improving the quality of mobile data services because of continued challenges with site acquisition for cell sites and the intensely bureaucratic permitting process of many local government units.”

Fitch Ratings said that it expected the two operators to “invest aggressively to expand their data services, now that they will have access to the coveted 700MHz spectrum”. It expects PLDT to invest $1 billion and Globe $850 million in capital expenditure “which are the highest amounts in the last five years for both companies”.

The ratings agency added: “The Philippine mobile market is highly saturated, but most users are on 2G networks – which provide telcos with plenty opportunities if they offer faster 4G LTE services.”

Cu said: “Coupled with our execution excellence as the preferred brand for Filipinos’ digital lifestyle choices, the additional frequencies will provide the much needed capacity to improve mobile browsing speeds that our customers would enjoy.”