CONNECTIVITY Unlimited Resource Enterprises Inc. (CURE), which is being auctioned as part of the regulatory approval on the deal between Philippine Long Distance Telephone Co. (PLDT) and Digital Telecommunications Philippines Inc., may be sold for about P900 million.
A BusinessMirror source said this was the initial value of the third-generation (3G) firm that was bought by the Pangilinan group from the Ongpin family in 2008.
“That’s the running number but it’s not yet set at P900 million. It will be finalized within the next nine months or so,” the source said.
CURE, which owns 10 megahertz (MHz) of spectrum, will be sold through competitive bidding by PLDT under the supervision of the National Telecommunications Commission (NTC). CURE, which operates the Red Mobile brand, is a unit of Smart Communications Inc., a wholly owned subsidiary of PLDT.
The NTC and PLDT both said CURE should fetch a minimum bid price that would allow it to recover its investment in acquiring, developing and operating the 3G firm, including, among other things, the $10-million acquisition price for CURE and P65-million annual spectrum users’ fee.
“We still have to sit down with the NTC on that. We bought CURE for $10 million and we invested to buy relevant equipment, incurred marketing expenses to build up the subscriber base. So all of these will be taken into account,” PLDT Chairman Manuel V. Pangilinan said last week.
Based on the divestment plan, CURE will sell its Red Mobile business to Smart, which will then sell all its rights and interests in CURE, whose remaining assets will consist of its congressional franchise and its 10MHz 3G license.
PLDT was given nine months to execute this, which also includes an “orderly transfer” of about 1 million or so Red Mobile customers to Smart.
Once PLDT surrenders CURE’s license and the congressional franchise back to the NTC, it would then have to be bid out to prospective buyers via a competitive auction. The terms of reference for the bidding, which would be done within six months from the end of the nine-month period, shall indicate that PLDT could not participate in the auction.
Pangilinan, in the same interview last week, said CURE will cease to operate. “We have committed to divest it,” he said.
For its part, the NTC, though Commissioner Gamaliel Cordoba, said it may tap the services of an auditing firm to verify CURE’s value. “Most likely we will do that so that there won’t be doubt as to the price that CURE would fetch,” he said in a separate interview.
On October 26 the NTC approved PLDT’s acquisition of a 51.55-percent stake in Digitel. The transaction is valued at about P69.2 billion.
Two days later, London-based Fitch Ratings Inc. upgraded PLDT’s long-term local currency issuer default rating to “A-” from “BBB.” The rating firm also removed PLDT from Rating Watch Positive, while the outlook is “stable.”
“The rating upgrade reflects Fitch’s expectation that the PLDT-Digitel combine will have a significantly improved market position despite having broadly the same credit profile,” Fitch said.
Globe to join auction
Meanwhile, Globe Telecom President Ernest Cu, in a text message, said the joint venture between Ayala Corp. and Singapore Telecommunications Ltd. is going to bid for the 10MHz of frequency, which will be surrendered to the regulators.
“Yes, we are [going to bid],” Cu said, adding that Globe is ready to compete with other phone firms that are also likely to join the auction. These may include Bell Telecommunication Philippines Inc., Liberty Telecoms Holdings Inc. and Express Telecommunications Inc., which are all affiliated with San Miguel Corp.
With the NTC approval of their deal, the PLDT-Digitel tandem will become the dominant operator, with about 70 percent and 66 percent of subscriber and revenue market shares, respectively.
Also, PLDT will have a much larger spectrum, with 25MHz of 3G compared to Globe, which has only 10MHz.
“We intend to continue what we are doing today, which is yielding good results for Globe. We are transforming ourselves to serve our customers better,” Cu said, when asked of the company’s strategy of moving forward.
Delfin Gonzalez, chief financial officer and head of the finance group of Ayala Corp., said during the Philippine Investment Summit for Global Fund Managers last week that Globe would continue to be competitive by offering better services.
“We continue to come up with competitive offers….We have been successful in this, having increased our revenue share in the last three or four quarters. Our propositions will be judged by the consumers, at the end of the day. It is the consumers that will make the choice so we have to make sure that our propositions are compelling enough to choose from,” he said.
But Globe would have been happier if the country had its own antitrust law to keep a watch on dominant players that could abuse their dominance power over small players, Gonzalez said.
“Unfortunately, the country does not have its own antitrust regulation, unlike in other countries where a combination such as this would have been prevented. Under existing laws in our country, the best is to try to get reduction on frequency concentration,” the official said.
