Deal shakes up telco sector PHILIPPINE LONG DISTANCE Telephone Co. (PLDT) yesterday moved to increase its dominance of the local telecommunications industry, announcing that it would be taking control of a Gokongwei-led competitor. PLDT will acquire a 51.55% stake in Digital Communications Philippines, Inc. (Digitel) -- the firm behind the low-price Sun Cellular brand -- from JG Summit Holdings, Inc. in a transaction valued at P69.2 billion. A mandatory offer to minority investors for the rest of the firm, if taken up fully, is expected to bring the deal’s total value to P74.1 billion. JG Summit, in return, will get a 12.8% stake in PLDT. The purchase involves 3.28 billion shares in Digitel along with zero-coupon convertible bonds and inter-company advances owed JG Summit, PLDT President Napoleon L. Nazareno said in a press conference. PLDT will swap one new share for every P2,500 worth of Digitel assets to be acquired. Minority shareholders were given the option to sell at a discounted P1.60 apiece or swap their stakes for PLDT’s shares at a premium of P2,500 per. The deal, which officials said would result in a combined cellular market share of some 67% -- no estimates were provided regarding other services -- is expected to be completed by end-June, the two companies said. The Sun Cellular and Smart cellular brands will be kept separate, while "Digitel fixed line operations can complement those of PLDT’s." Lance Y. Gokongwei, president and chief operating officer of JG Summit Holdings, said the share swap was a "very difficult decision" that would help maintain their participation in the industry. JG Summit Holdings will be given one board seat in PLDT as a result of the transaction, he said, with the post going to JG Summit Chairman James L. Go. Rival firm Globe Telecom, Inc., in a statement, said it was prepared to keep competing in the mature industry. "The Digitel and PLDT merger will not fundamentally change our strategy. We stand ready to compete, and to defend and grow our market share," Globe President and CEO Ernest L. Cu said. "This industry has always been intensely competitive, and we have been a strong challenger to a dominant incumbent all this time. We will continue to focus on delivering relevant products to our retail and corporate customers, providing differentiated customer service and enhancing our network to deliver the best experience possible to our subscribers," Mr. Cu added. Jose Mari Lacson, analyst at Campos, Lanuza & Co., Inc., said: "PLDT is not out to kill the competition, but growth of Globe will be limited." A price war that was accelerated by the entry of Digitel has eroded telco margins in the country’s saturated market, with penetration at around 90% against a population estimated to be nearing 100 million. PLDT Chairman Manuel V. Pangilinan said the deal would dilute stakes held by Hong Kong’s First Pacific Co. Ltd. and Japan’s NTT Communications. First Pacific’s stake will drop to 22% from 26% while NTT Communications’s stake will decrease to 18% from 21%. PLDT -- valued at $8.9 billion -- saw it shares close unchanged at P2,036 per yesterday ahead of the deal’s announcement. The firm will come under one-hour trading halt starting at 10:00 a.m today, the Philippine Stock Exchange said. JG Summit and Digitel -- valued at $269 million -- were last traded on Monday at P24.50 and P1.83 per share, respectively. Trading was suspended yesterday on the firms’ request. Shares of Globe Telecom -- valued at $2.1 billion -- closed at P746 apiece yesterday, 7% or P49 higher. Mediaquest Holdings, Inc., a unit of the Beneficial Trust Fund of PLDT, has a minority stake in BusinessWorld. -- reports from K. A. Martin and Reuters
"In some months it will be more than 5% and in some it will be less," he added. Still, the outlook is that the rise in consumer prices will eventually taper off, resulting in an "average that is well within target". The BSP, said Mr. Tetangco, needs to "make sure that inflation expectations remain anchored and that any possible second effects would be dealt with at an early stage". "If we will take any action, it is going to be gradual". Analysts expect the central bank to keep raising policy rates. "I see inflation breaking the 5% target, rising up to 5.5%," University of Asia and the Pacific economist Cid L. Terosa said in a telephone interview. "I think it is inevitable for the central bank to raise rates. The market can absorb further rate hikes as they have other options, but end consumers have little left to do when inflation continues to rise," he added. The BSP, which has warned that its 4.4% inflation forecast for 2011 was at risk, last week set a 25 basis point rate hike, its first adjustment since July 2009. "Our view is that the central bank will continue to raise rates, as it is only in the beginning of a tightening cycle," Standard Chartered economist Simon Kwok-Cheung Wong said in an e-mail. The central bank’s policymaking Monetary Board is scheduled to hold its next review on May 9. Mr. Tetangco, in his speech at the MAP meeting, said the country was still set for modest economic growth despite disruptions such as civil unrest in the Arab world and the disaster in Japan. "Stronger private consumption, overall improvement in [the] business outlook, healthy banking system and infrastructure growth because of PPPs (public-private partnerships) will offset the risks posed by escalating commodity prices and [a] possible decrease in remittances due to crises in the MENA (Middle East and North Africa) and Japan," he said. "Effects of the recent events will likely to be just in the first half. In the long-term the effect will be positive." Economic managers have ordered a review of existing macroeconomic targets, with some Cabinet officials and Mr. Tetangco saying that the 2011 gross domestic product goal of 7-8% will likely be missed. -- with a report from Reuters |
U.S. Stocks Advance Amid Gains From Home Depot, Energy Shares U.S. stocks advanced, sending the Standard & Poor’s 500 Index to a three-week high, as Home Depot Inc. (HD) drove consumer companies higher and energy shares rose amid speculation production will increase in the Middle East. Home Depot rose 2.9 percent, the most in the Dow Jones Industrial Average, as the largest U.S. home-improvement retailer sold $2 billion in bonds to help finance buybacks. Rowan Cos. and Schlumberger Ltd. (SLB) rallied more than 4.4 percent as oil gained 0.8 percent. AK Steel Holding Corp. (AKS) gained 5.2 percent as SAC Capital Advisors LP reported a stake. Apollo Group Inc. (APOL), owner of the biggest U.S. for-profit college, fell 4.3 percent following lower enrollment. The S&P 500 rose 0.7 percent to 1,319.44 at 4 p.m. in New York. It rebounded after falling to 1,305.26, compared with yesterday’s 50-day average of 1,306.11, a bullish sign to some traders. The Dow gained 81.13 points, or 0.7 percent, to 12,279.01, three days before a U.S. government report forecast to show non-farm payrolls increased by 190,000 in March. “It’s hard not to want to be a part of this market when there’s clear economic momentum being driven by the jobs market,” said James Paulsen, chief investment strategist at Minneapolis-based Wells Capital Management, which oversees about $340 billion. “Any other week, these downgrades of Greece and Portugal would knock the market down.”
Yields on five-year notes climbed for a ninth day in the longest losing streak since before Lehman Brothers Holdings Inc. collapsed in 2008 as the Treasury paid the highest yield at a five-year debt auction since April 2010. James Bullard of the St. Louis Fed said in Prague today that the central bank may need to cut about $100 billion from its $600 billion plan to buy Treasuries through June under what’s become known as its policy of quantitative easing. “The auction was not very good,” said Michael Franzese, managing director and head of Treasury trading at Wunderlich Securities Inc. in New York. “There are not many takers coming into the market. People don’t know what the Fed is going to do. The market’s in a state of confusion.” Yields on existing five-year notes climbed five basis points, or 0.05 percentage point, to 2.23 percent at 4:59 p.m. in New York, according to Bloomberg Bond Trader prices. The 2.125 percent security maturing in February 2016 dropped 7/32, or $2.19 per $1,000 face amount, to 99 17/32. Two-year note yields gained as much seven basis points to 0.82 percent, the highest level since Feb. 17. Five-year note yields touched 2.24 percent, the highest since March 4. |
Crude Oil Advances as Equities Increase Amid Signals Economy to Recover Oil rose for the first time in four days in New York as an advance in U.S. equities signaled the economic recovery may accelerate. Crude gained 0.8 percent, erasing an earlier drop, as the Standard & Poor’s 500 Index increased amid advances in consumer stocks and St. Louis Federal Reserve President James Bullard said the Fed may be able to cut about $100 billion from its plan to buy Treasury securities as the economy rebounds. “We’re seeing equities move higher, and that’s giving a little bit of positive sentiment toward crude,” said Matt Smith, a commodities analyst for Summit Energy Services Inc. in Louisville, Kentucky. “The remarks by Mr. Bullard indicate the potential for the economy is looking a little better.” Crude for May delivery gained 81 cents to settle at $104.79 a barrel on the New York Mercantile Exchange. Oil has risen 28 percent in the past year. Brent crude for May settlement on the London-based ICE Futures Europe exchange rose 36 cents, or 0.3 percent, to $115.16 a barrel. The S&P 500 gained 0.7 percent to 1,319.44 and the Dow Jones Industrial Average rose 0.7 percent to 12,279.01. If uncertainties in the global economy are resolved, the Fed could “pull up a little bit shy of our total of $600 billion,” in planned purchases of Treasury securities, a measure known as quantitative easing, Bullard told reporters today in Prague, where he was attending a financial conference. |
Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com
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