MANILA, Philippines (UPDATE) - Ayala Corp. said Monday it has no plans to exit its telecommunications business despite tougher competition with the merger of two of its rivals.
Ayala and its partner Singapore Telecommunications Ltd. (SingTel) were excited about Globe Telecom Inc.'s prospects, the chairman of the country's oldest conglomerate told reporters.
"I see no reason to disrupt the partnership between Ayala and SingTel," Jaime Augusto Zobel de Ayala said, when asked if the group would be willing to accommodate a new investor for Globe.
"It's a very interesting time for the industry. It would be foolish of us to get out at this time," he added.
Globe's main rival, Philippine Long Distance Telephone Co. (PLDT), has offered to buy third-ranked Digital Telecommunications Philippines Inc. (Digitel), the operator of low-cost brand Sun Cellular, for a total of P74 billion.
Analysts earlier said the deal would give PLDT 70% of the mobile phone market to the disadvantage of Globe.
Zobel, however, said they were unfazed by stiff competition in the industry.
"In fact, together with our partner, we're very interested in building Globe up," he said.
Globe, the country's No. 2 telco, had said it would spend $500 million to upgrade its network as it looks to protect market share.
Aside from Globe, Ayala also owns property giant Ayala Land Inc., lender Bank of the Philippine Islands and utility Manila Water Co. It also has interests in business process outsourcing, electronics and car dealerships.
This year, the conglomerate is hiking capital expenditures by 20% to about P80 billion to accommodate plans to expand into power generation and infrastructure.
The group is looking to build a portfolio of power generation assets of about 1,000 megawatts over the next 5 years, aiming to become a key player in the power sector, where additional demand of 8,000 MW is expected over the next decade.
Ayala also plans to bid for the contract to operate 2 major elevated railway systems in Metro Manila, which the government will auction under its public-private partnership program.
"We believe power is a potential source of long-term growth for Ayala. We feel there is an opportunity for new players to come in," Zobel said.
The group, through Michigan Power Inc. unit, has bought a 50% stake in NorthWind Power Development Corp., which owns and operates Southeast Asia's first commercial wind farm. The wind farm in northern Ilocos Norte province has a 33-MW capacity.
Zobel said Ayala plans to develop greenfield projects and bid for state power facilities that will be up for sale.
With electricity demand in the Southeast Asian country projected to rise steadily in the coming years, Philippine conglomerates are looking to venture into power generation.
San Miguel Corp., now the country's largest power producer, plans to spend $5 billion to double its capacity to 6,000 MW in 5 years.
Manila Electric Co., the country's largest power distributor, also plans to beef up its power generation capacity by another 1,500 MW during the same period. The firm is controlled by another conglomerate, Metro Pacific Investments Corp., and also partly owned by San Miguel. - With reports from Coco Alcuaz, ANC; Reuters