San Miguel enters broadband market with Qatar telco
abs-cbnNEWS.com | 12/08/2008 9:34 PM
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San Miguel Corp, one of Southeast Asia's largest diversified conglomerates, announced Monday that it is planning to form a joint venture with Qatar Telecom QSC (QTEL) to enter the wireless broadband business in the Philippines.
San Miguel and QTEL did not provide details on how much the they will be investing in this new venture, and what market and area in the Philippines they will focus on.
State-owned QTEL, an integrated telecommunications player in Qatar, has an aggregate subscriber base of 55 million from 16 countries where it operates GSM or WiMax services. It has been expanding its WiMax services in several emerging markets as it hopes to join the ranks of top 20 telecommunication companies in the world. It recently acquired Indonesia's second largest mobile operator for $1.8 billion.
On the other hand, San Miguel, which has a strong cash position after several asset divestments here and abroad, has been on a buying binge. It just recently clinched a total of about P36 billion direct and indirect stakes in Meralco, the country's biggest power retailer.
Today, it also announced a P32.8 billion deal to acquire majority stake in Petron Corp, the country's largest oil refiner and retailer. San Miguel is buying the stake from investment firm, Ashmore group, which just finalized its purchase of the remaining shares of the government in Petron. Ashmore, which now holds about 90 percent of Petron, is likely to sell about 50.1 percent of its shares in Petron to San Miguel at a price at par with its purchase price.
In a statement, San Miguel said it is entering the capital intensive telecommunications business because "SMC believes that the Filipino consumer will be the ultimate beneficiary of its intended investments...Customers will now have access to a reliable service provider offering affordable high-speed wireless broadband and communication solutions."
Existing players
The San Miguel and QTEL joint venture will make them the newest entrant in the country's broadband sphere.
Current players in the local broadband market include incumbent domestic and international fixed-line and wireless services provider, Philippines Long Distance Company (PLDT), Ayala family-led Globe Telecoms, Lopez family-led Bayan Communications, Gokongwei family-led Digital Telecommunications, and recent entrant, Connectivity Unlimited Resource Enterprises (CURE).
Although on a steady increase, broadband subscribers represented only a fraction of all Internet subscribers in the country. However, the Internet sector is well positioned for growth, with a deregulated market, strong government support for IT development and an increasingly Internet savvy population.
In 2008 there was a significant surge in broadband uptake, with total subscribers believed to have breached the 1 million level from just about 340,000 in end-2006. Much of the growth can be attributed to the expansion of PLDT's SmartBro wireless broadband, which added 65,000 new subscribers in the third quarter alone. As of end-September, SmartBro had a total of 473,000 subscribers, pushing PLDT's total wireless and fixed line subscriber base to 880,000.
Rival Globe Telecom, meanwhile, said it is significantly growing its broadband subscriber base, which has reached 175,000 as of end-September this year.
Dominant PLDT has the most extensive nationwide domestic fiber optic network and microwave long-distance network. But because the Philippines, an archipelago of more than 7,100 islands, remains to have low fixed-line penetration, a growing broadband offering is to piggy-back this with mobile infrastructure or other wireless- or satellite-based network.
Since 2007, PLDT itself has stopped looking towards the wireline telecoms market and instead is investing in wireless broadband cell sites, 3G mobile network rollout and its call-centre business.
Lopez cable firm, SkyCable, however, continues to bank on its existing cable infrastructure to offer wireline broadband services to residential consumers through its SkyBroadband brand. SkyCable allocated P500 million for 2009 to expand its broadband services, and increase its current 10,000 subscribers.
New entrants
Broadband subscription could have leapfrogged and improved had the National Broadband Network (NBN) that the government was planning to roll out across the country from late 2008 at a cost of $329 million pushed through. However, allegations of bribery and overpricing in the NBN deal have swarmed through the press, resulting in the government's scrapping of its original contract with ZTE Corp, the second largest telecommunications firm in China.
While the botched ZTE-NBN deal was feared to put a dent in plans to raise broadband network coverage and undermine potential investor confidence, this did not become the case.
Recently, aside from San Miguel and QTEL, there have been a number of interested investors eyeing to penetrate the promising Philippine wireless broadband market.
Thailand telecom firm and Asia's leading commercial satellite broadband operator, Thaicom Public Co. Ltd., invested $15 million for its facility in Manila--its 11th facility in the world--to offer broadband Internet services, mainly in rural areas in the Philippines. It tapped local firm We are IT Philippines Inc. (WIT) as its local operator.
Another interested broadband player is listed Transpacific Broadband Group International Inc. (TBGI), which recently said is seeking some P222 million in investment from a holding company to be funded by Prince Abdul Aziz Bin Talal Al Saud of Saudi Arabia. The holding company, called Arab-Asia Holdings Corp, will serve as the royal family's investment vehicle in Asia.
TBGI currently holds a congressional telecom franchise to operate satellite facilities inside the Clark Special Economic Zone.
