PLDT, Globe shares rise on better telco outlook


Posted at Mar 30 2011 11:25 AM | Updated as of Mar 31 2011 02:28 AM

MANILA, Philippines (UPDATE) - Shares of PLDT and main rival Globe Telecom Inc. soared on Wednesday on hopes PLDT's take over of the industry's No. 3 player could bolster pricing in the competitive mobile phone market.

Philippine Long Distance Telephone Co. (PLDT) jumped as much as 17% to P2,380, a 7-week high, after a brief trading halt on Wednesday. The top-traded stock helped push up the main index, which ended 3% higher.

PLDT is acquiring Digital Telecommunications Philippines Inc. (Digitel) in a deal valued at about P74.1 billion. Analysts said the move could result in a duopoly that would boost the pricing power of the country's top two telcos.

"PLDT killed a competitor in a deal that basically injected new life into the Philippine telecom industry," said Jose Vistan, research head at AB Capital Securities in Manila.

"With less players, we will likely see more pricing power for both PLDT and Globe," he said.

Digitel's cheap mobile offerings had sparked a price war that eventually eroded telecom firms' margins in a saturated mobile market. Service revenue at both PLDT and Globe fell in 2010.

PLDT, the country's top telecom firm, agreed on Tuesday to take control of third-ranked Digitel in a $1.6 billion deal involving a share swap and assumption of debt and advances of Digitel from parent JG Summit Holdings.

Second-ranked Globe climbed as much as 20.6% to its highest in nearly five months at P900, before closing at P842, a gain of almost 13%.

"Globe Telecom, without having to go through any form of dilution or spending a single peso, gets a free ride from the PLDT-Digitel transaction," AB Capital Vistan said.

Globe, partly owned by local conglomerate Ayala Corp. and Singapore Telecommunications Ltd. said it was ready to face a larger PLDT and grow its market share in a competitive industry.

Shares in Digitel fell as much as 15.8% to P1.55, after PLDT offered to buy the rest of Digitel from minority investors at P1.60 per share in a tender offer sometime in May or June.

Digitel's parent JG Summit Holdings Inc. jumped as much as 12.2% before paring its gains to end 3.5%. JG Summit would hold 12% in PLDT after the deal. - Reuters