The strategy of Globe Telecom is to grab the unused 700 MHz spectrum available with San Miguel, one of the main rivals of Globe Telecom, and build its mobile Internet business.
The $1.5 billion deal indicates the exit of San Miguel from telecom business.
Philippine Long Distance Telephone (PLDT) and Globe Telecom are each taking a 50 percent stake in the business.
San Miguel is selling its telecom business two months after it ended talks with Telstra for a joint investment in a new mobile network in the Philippines.
Bloomberg reports that the deal gives PLDT and Globe Telecom access to the 700 megahertz spectrum that regulators had largely assigned to three companies including San Miguel’s Liberty Telecoms Holdings unit.
The Philippines ranks 101 among 144 countries and regions in average internet connection speed at 3.1 megabits per second, compared with the 5.1 megabit global average, according to a survey Akamai Technologies Inc. published in September.
Prior to Monday’s agreement, PLDT and Globe Telecom had raised capital spending to boost their digital network capacity before San Miguel’s entry.
As part of the deal, Globe Telecom will buy 50 percent stake in Vega Telecom from San Miguel, 50 percent stake in Bow Arken Holdings and 50 percent stake in Brightshare Holdings.
VTI owns an equity stake in Liberty Telecom Holdings. VTI also has equity stakes in enfranchised companies, including Bell Telecommunication Philippines, Eastern Telecom Philippines, Express Telecom, and Tori Spectrum Telecom, among others.
Philippine Long Distance Telephone Company will own the remaining 50 percent equity stake in VTI, BAHC and BHC.
The total enterprise valuation of VTI, BAHC and BHC was estimated at P70.0 billion, including total liabilities of P17.2 billion.
The deal preserves the government’s option to enable a future player to offer telecommunication services because a significant amount of unused spectrum assets covering a complete set of 2G,3G, 4G, and potential 5G frequencies will be returned to the NTC.
“We entered into this transaction as a solution to harmonize the spectrum assets in the country and immediately unlock the benefits of the underutilized frequencies,” said Ernest L Cu, president and chief executive officer of Globe Telecom.
Globe is making an investment of approximately $750 million towards capital expenditures (Capex) in 2016 – primarily targeting the deployments of LTE mobile and LTE @Home, capacity and coverage augmentation of the 3G-HSPA+, VDSL, and GPON networks, as well as in domestic transmission and international cable capacities.