You may have woken up today to the surprising news that PLDT and Globe have each acquired 50% of San Miguel Corporation’s telecommunications business. If you were like us, you would’ve been wondering what it actually means. We don’t blame you; trudging through news about business talks can be a chore. Luckily, we’ve pored over PLDT’s and Globe’s press releases to detail what this latest acquisition means to you.
If you remember some rumors that were circulating several months ago, San Miguel Corporation (SMC) was in talks to set up a third major telecommunications player in the Philippines—Australia’s Telstra. The rumored move signaled SMC’s motives to enter the big-name telecommunications arena. Prior to these talks (and their eventual falling out), SMC had already dabbled into the telecom industry, namely Vega Telecom, which includes interests in Bell Communication Philippines, Eastern Telecommunications, Cobalt Telecommunication, Tori Spectrum Telecommunication (what was formerly called Wi-Tribe), and Hi-Frequency Telecommunication.
Today, PLDT and Globe have announced their approval in acquiring equity interest and the accompanying liabilities in the above properties.
Why this matters
Now, why should you care about these two acquiring a bunch of businesses? Because of the frequencies involved. The properties acquired were harboring certain radio frequencies for their operations. Basically, frequency corresponds to how fast your internet speed is. The more (and higher) bandwidths a telecom utilizes, the better its service becomes, in theory.
Following their acquisition, both PLDT and Globe now have access to more frequencies, particularly the 700MHz frequency. This specific frequency is most often used recently in 4G connectivity. Increasing control over these frequencies will simultaneously increase internet speed and capacity, if used right. PLDT is hopeful that the transaction will improve their performance in both wireless and indoor usage.
It is worth noting that both PLDT and Globe have been asking for the 700MHz bandwidth since earlier this year, citing the possibilities of 700MHz allocation. They have fingered the bandwidth’s then-inactivity to SMC’s broadband operator.
Further, Globe has cited the difficulty in setting up additional cell sites, especially in rural areas, because of the red tape, fees, and permits involved. The company points out that these hurdles are to blame for capacity issues and slow internet speeds. It then says that the acquired bandwidth will increase the capacity of the existing sites, which will lessen the burden from building new sites.
In addition, the acquisition will cause the former companies to relinquish their holds over bandwidths in the 700MHz, 850 MHz, 2500MHz, and 3500MHz bands and return them to the government. This will cause the government to have enough assets which will allow a third telecom company to enter the market if it so chooses.
When we can expect
PLDT has claimed that significant network performance improvement can be expected the soonest it can utilize these resources. It should be noted that today’s announcement is just the approval of the acquisition, not the acquisition or transfer of resources itself.
Within their press release, Globe said that it’s set to deploy fiber optic cables in 20,000 barangays all over the country to provide faster and more reliable internet access. Realistically, Globe has set this infrastructure’s timeline to five years, but will increase coverage and speed within that time.
Both companies have also cited their hope or optimism that the resources surrendered to the government will enable a new player into the industry.