Govt must first approve Globe purchase of Bayan

[dropcap color=”#dd9933″]B[/dropcap]EFORE Globe Telecom Inc. could roll out its “coordinated expansion” plan for the Lopez-owned Bayan Telecommunications Inc. (Bayan), the National Telecommunications Commission (NTC) must first approve the Ayala-led firm’s acquisition of the debt-ridden company.

Globe Chief Financial Officer Alberto M. de Larrazabal said his firm could only make improvements in Bayan—both in terms of infrastructure and services—once the telco regulator issues its approval of the debt-to-equity restructuring program for the Lopez-led company.  “It will be part of the overall coordinated expansion plan. It will only come after the NTC approves the transaction,” he said.

De Larrazabal said the Lopez-led firm has posted positive signs last semester. “Actually, their cash flow is positive. It’s just [that] their interest burden is way too high. And as we bought out their debt and converted it to equity, they would get back to profitability. That, together with the synergies that we will put together, I think, will be a good sustainable investment,” de Larrazabal said.

The decision of the telco regulator was supposed to have been issued last month. Globe President and CEO Ernest L. Cu noted, however, that the restructuring program’s approval would be issued “sometime soon.”

“We’re quite close to receiving [the decision],” he said.

The rehab plan, approved by the court in September last year, seeks to significantly reduce the debt burden of the Lopez-led firm through a conversion of up to 69 percent of debt-to-equity, which translates to $131 million in two separate tranches of conversion.

The first phase of conversion was completed in October last year, after Bayan issued common shares for a 39-percent equity stake in the company to Globe and its other creditors.

The second tranche of conversion involves 40 percent of the debt to be converted to equity.

Once completed, Globe would effectively hold a 57-percent stake in Bayan. The Lopez family is looking at divesting its entire shareholding in its telco business, pending the approval of the NTC.

The acquisition would aid Globe in further improving the quality of its network as it would enable further growth in data with the additional spectrum from the Lopez-led firm, Fitch Ratings earlier commented.

But rival Philippine Long Distance Telephone Co. (PLDT) opposes the takeover, filing a petition before the NTC to disprove the acquisition, saying that “it perpetuates an anticompetitive and anticonsumer telecommunications environment.”

PLDT said the conversion would result in an imbalance in the total spectrum of Globe and Bayan to its number of subscribers. The Pangilinan-led firm has a 68-percent market share, while Globe services 32 percent of the telecommunications market.

Bayan is currently servicing about 500,000 customers nationwide. As of the first half of 2014, Globe has a customer base of 43 million subscribers.

 Lorenz S. Marasigan

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