Globe says merger may impede competition
MANILA, Philippines—Ayala-led Globe Telecom Inc. has called for a probe of the impending P74.1-billion takeover by Philippine Long Distance Telephone Co. of competitor Digital Telecommunications Philippines Inc. that could turn the competitive telecommunications industry into a “virtual monopoly.”
Globe, which will end up facing a competitor with a market share twice its size, said the government should assess the potential impact of the takeover on the industry and ensure that the rights of consumers would be protected.
“There has been a lot of discussion on what the impact of the merger is in the long term. That still has to be discussed by the government, by politicians and by the President,” Globe president and CEO Ernest Cu said.
“It is always a good idea to have a regulator that can recognize when competition is being impeded,” he told reporters at a briefing following the company’s annual shareholders’ meeting.
Once the takeover is completed, PLDT will corner more than two-thirds of industry revenues and have a subscriber base of seven in every 10 mobile users in the Philippines.
Having a single player dominating bulk of the country’s telecom market, allowing it to dictate pricing, would be bad for consumers, Cu said.
Taking steps such as ordering PLDT to let go of some of its frequency allocations—after the takeover is completed—would be “in the effort of preserving long-term competition in the Philippines,” Cu added.
“If you follow the pattern of the merger and look at practices in other more developed countries, there is the possibility of divestiture to keep business competitiveness,” he pointed out.
In other countries like the United States, whenever two telecom providers merge, Cu said regulators usually took back some of the frequencies that have been used by the combined entities.
“There have been discussions about divestiture of frequency, divestiture in some markets and even whole businesses,” he said.
Cu said Globe was prepared to compete with a much bigger market leader after PLDT takes over the Digitel-run Sun Cellular mobile brand.
“In the short term, things won’t change. Globe has always competed with a much bigger incumbent industry leader,” he said, adding that the company was now poised for growth following a decline in profits in 2010.
Last year, the company posted a 22-percent drop in earnings to P9.7 billion.
“Globe will continue to focus on its own strategy,” Cu said, noting that the company would improve the quality of its services to keep fickle subscribers loyal to the network and maintain market share.
Whether or not the PLDT-Digitel deal results in a more “rational” market where unsustainable price pressures push profit margins down, Cu said: “We don’t run our business hoping competition will be friendlier.”
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