THE Roberto V. Ongpin-led ISM Communications Corp. is selling its remaining stake in Eastern Telecommunications Philippines Inc. (ETPI) for P1.5 billion to San Miguel Equity Securities Inc., a wholly owned unit of the diversifying San Miguel Corp. (SMC),
Before the deal, ISM still held a 37.7-percent interest in the country’s oldest phone company.
In separate statements to the Philippine Stock Exchange on Thursday, SMC and ISM said they had entered into a share-purchase agreement for the sale of the ETPI stake for a total consideration of P1,507,777,692.
SMC said the agreement was executed on Thursday and was authorized by the board on two separate occasions in December last year and September this year.
ETPI is the third phone company acquired by SMC, after Liberty Telecommunications Holdings Inc. and Bell Telecommunications Inc.
SMC President Ramon S. Ang had said his group is working on the acquisition of Express Telecommunications Co., which is still in rehabilitation.
But ETPI is a big catch for SMC because of its extensive backhaul and fiber cable, which connects the major business districts in the metropolis as well as the Cavite-Laguna-Batangas-Rizal and Quezon region.
San Miguel fell 0.4 percent to P110.60 at the close of trading on Thursday, while ISM declined 1.5 percent to P3.39.
In December 2010 ISM sold 100 percent of its equity interest in AGN Philippines Inc. to Vega Telecom Inc. for P1.6 billion. AGNP was the vehicle through which ISM owned 40 percent of ETPI. Vega Telecom is a unit of SMC.
Gain on this sale, as recognized in profit, amounted to P269 million. With the sale of the ETPI stake, ISM ended 2010 with cash and receivables of over P3 billion. Thus, this year, ISM vowed to be aggressive in seeking new profitable ventures for ISM.
In July ISM acquired a 97.28-percent stake in Philippine Bank of Communications for P4.68 billion.
The entry of Vega Telecom will address the ETPI’s long-term plans, which include delivering telecommunications services to end-consumers, particularly in far-flung areas. Another significant concern for ETPI is the funding to be able to succeed in its goals.
“The entry of Vega Telecom, through the acquisition of 100 percent of AGN Philippines Inc. from ISM adequately addresses the foregoing matters,” ISM Assistant Corporate Secretary Rodolfo Ponferrada said.
“There are two significant matters that ETPI must address in order to grow its business: an alternative means to deliver telecommunications services via the so-called last mile to the consuming public and cash infusion to fund the capital expenditure to expand its footprint,” the company said.
With SMC as Vega Telecom’s parent firm, ETPI can compete head on with other telco players.
“We understand that Vega, through its other telecom subsidiaries, is a grantee of frequency allocation by the National Telecommunications Commission and that Vega, as a member of the SMC group, is equipped with the financial wherewithal in funding ETPI’s requirements,” Ponferrada said.
ISM was referring to SMC’s other telco interests. Liberty Telecoms and Bell Tel are also holders of precious broadband frequencies.
SMC has already entered the broadband space through Vega Telecom’ purchase of 41.48 percent in Liberty Telecoms, which operates wi-tribe.
Liberty aspires to be a major player in the wireless broadband sector amid stiff competition from major players that are also already offering Worldwide Interoperability for Microwave Access or WiMAX service.
Liberty is a joint venture between SMC and Qatar Telecom, Qatar’s dominant telephone service provider.
SMC earlier disclosed that it would buy up to 49 percent of Liberty Telecoms.
