The P70-billion deal between Philippine Long Distance Telephone Co. (PLDT) and Digital Telecommunications Philippines Inc. (Digitel) would have only a “modest impact” on PLDT’s books, the chairman of the country’s largest phone firm said.
“It would take some time to see quite a level of returns,” PLDT Chairman Manuel V. Pangilinan said during Thursday’s Philippine Investment Summit for Global Fund Managers. “The Digitel acquisition would probably have a modest impact on the overall bottom line of the group. It is imperative that the returns on investment be realized sooner rather than later,” he said.
The acquisition of Digitel by PLDT would result in a number of adjustments, including PLDT’s overall profit for the year. But Pangilinan said it is still too early to say if there would be a need to revise the group’s 2011 core net-income target.
PLDT is expecting a 4-percent drop in service revenues this year from 2010, while the expectation for this year’s and next year’s full-year core net income remains unchanged at P40.5 billion. The guidance numbers do not take into account the impact arising from the PLDT-Digitel transaction.
“The acquisition will give rise to quite a number of adjustments but it is rather difficult to say and predict how the numbers would move about in 2011 as a whole because of the impact arising from Digitel. There’s a lot of goodwill that arises in that acquisition,” Pangilinan said.
PLDT shares jumped 2.5 percent to P2,388 on Thursday for an eighth day of gains, while Digitel rose 2.6 percent to P1.58, the highest close since May 3. JG Summit Holdings Inc., the former parent of Digitel, declined 2.7 percent to P25.
PLDT posted P21.30 billion in reported net income during the first six months of the year. Asked about the phone giant’s third-quarter financial results due to be announced next week, Pangilinan said the company posted “broadly similar to the first-half results.”
The multibillion-peso deal was approved on Wednesday by the National Telecommunications Commission, subject to several conditions, which PLDT and Digitel should comply with. The regulator’s decision states that the approval of the joint application shall be effective upon acceptance by both PLDT and Digitel. On the day the deal was approved, PLDT and Digitel separately filed their acceptance of all terms and conditions stipulated in the regulator’s order.
The conditions include the divestment of 10 megahertz of 3G frequencies from the PLDT group and the permanent implementation of unlimited call and text services of Digitel through its Sun Cellular brand.
Pangilinan maintained on Thursday that his group would keep the Sun Cellular brand.
Call and text messaging rates, he said, will further go down as the regulators decided to slash interconnect fees for short message service.
“The lower interconnect fees could lower the charges in texting immediately. We are already very low, at least on our side. We are down about eight to nine centavos and it could further go down because of lower interconnect fees,” Pangilinan said.
