Philippine mobile: a two-horse race
Those with fast fingers in the world’s texting capital now have a choice of just two mobile providers after Philippines’ biggest ever M&A deal.
After a seven-month review, Philippine regulators cleared the takeover of Digital Telecommunications Philippines (Digitel) by the dominant Philippine Long Distance Telephone Co (PLDT). The ruling will in effect hand PLDT control of 70 per cent of one of Asia’s most lucrative phone markets. The rest of the market is owned by rival Globe Telecom, giving rise to a wireless phone duopoly.
PLDT, partly owned by First Pacific Co Ltd of Hong Kong, and NTT Communications and NTT DoCoMo of Japan, said on Wednesday it had completed the acquisition of 51.6 per cent of Digitel, the country’s third biggest phone company, for 69.2bn pesos ($1.6bn). The deal, the country’s biggest M&A transaction, was first agreed in March but had to undergo regulatory review lasting seven months.
The regulator, National Telecommunications Commission, was under pressure from Globe Telecoms, consumer groups and politicians to block the deal. They feared it would give PLDT too much market power that could leave consumers with fewer choices and higher costs.
Their fears are not without their merits. Digitel is an aggressive player whose low-priced offers made it popular with consumers. It rapidly grew its market share to 16 per cent, and forced both PLDT and Globe to match its affordable wireless voice, messaging and broadband services, narrowing the two companies’ margins considerably.
Even the country’s president, Benigno Aquino III, had expressed apprehensions about the anti-competitive risks posed by the PLDT-Digitel merger. Still, regulators had no choice but to approve it in the absence of an anti-trust law the country. The Philippine Congress is still debating the provisions of a competition law that will empower agencies to implement various anti-monopoly provisions in the constitution and legal statutes.
The most that the regulators were able to do was order PLDT to divest another telecoms unit that owns 10 megahertz of 3G frequencies, and to continue Digitel’s popular unlimited call and text offers.
The regulators said the approval for the PLDT-Digitel merger was conditional, and could be revoked if they violated the conditions. “In case any of the applicants fail to comply with the conditions, then the decision itself will be declared null and void, meaning the merger, in case, the parties fail to comply with it, it will be nullified,” said Carlo Jose Martinez, one of the telecommunications regulators.
Until the country’s lawmakers approve a good anti-trust law, the regulators’ cautionary words will remain just that no matter how tough they sound.
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